Security A and Security B have similar risks.However,Security A has a higher rate of return than Security B.The return on Security A minus the return on Security B is referred to as which one of the following?
A) market return
B) abnormal return
C) deviated return
D) excess return
E) real return

Question

Quizplus · Accepted Answer

The difference between the return on two securities with similar risks is called the excess return. Therefore, option D is the correct answer. Option A is incorrect because market return refers to the return on the overall market or a specific market index. Option B is incorrect because the abnormal return is a return that is higher or lower than what would be expected based on the security's risk and market returns. Option C is not a commonly used term in finance. Option E refers to the return on an investment adjusted for inflation.

Security a and Security B Have Similar Risks