Question 1

The risk premium for a capital investment by comparing the expected return on that investment with the expected return on the entire stock market is measured by

Accepted Answer

The Capital Asset Pricing Model (CAPM) measures the risk premium for a capital investment by comparing the expected return on that investment with the expected return on the entire stock market, taking into account the investment's sensitivity to market movements (beta).

Question 2

The quantity of present goods that must be forgone to increase future consumption by 1 unit is called

Accepted Answer

The relative price of future goods refers to the amount of present goods that must be sacrificed to obtain an additional unit of future goods. This concept is crucial in understanding intertemporal choice and the trade-off between present and future consumption.

Quiz 1: Economics Concepts

The risk premium for a capital investment by comparing the expected return on that investment with the expected return on the entire stock market is measured by

The quantity of present goods that must be forgone to increase future consumption by 1 unit is called