The required return on a risky investment includes a real rate of return, an inflation premium and a risk premium.

Question

Quizplus · Accepted Answer

The required return on a risky investment indeed comprises a real rate of return (reflecting the time value of money without inflation), an inflation premium (to compensate for the loss of purchasing power), and a risk premium (to compensate for the risk associated with the investment).

The Required Return on a Risky Investment Includes a Real