The term,EXCESS,returns is commonly defined as

Question

Quizplus · Accepted Answer

Excess return is usually defined as the excess return of a portfolio over the risk-free rate of return. It is the return earned over and above the risk-free rate, which compensates investors for taking on additional risk. Therefore, the correct definition of excess return is option B, which is total portfolio returns minus the risk-free rate. Option A is incorrect because the market rate is not used in calculating excess returns. Option C is not entirely incorrect, but it is a more specialized definition that is used when measuring the performance of a portfolio against a benchmark. Option D is incorrect because there is a definition of excess return, which is total returns minus risk-free rate.

The Term,EXCESS,returns Is Commonly Defined as