Mary owns a risky stock and anticipates earning 16.5 per cent on her investment in that stock.Which one of the following best describes the 16.5 per cent rate?

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Quizplus · Accepted Answer

The 16.5% rate represents Mary's expected return on her investment in the risky stock. It is not a risk premium, which refers to the additional return required for taking on a risky investment compared to a risk-free investment. It is also not a systematic return, which refers to the portion of an asset's return that is driven by factors beyond the asset's own characteristics. Real return refers to the return adjusted for inflation, which is not mentioned in the scenario. Market rate refers to the prevailing interest rate in the market, which is also not mentioned in the scenario.

Mary Owns a Risky Stock and Anticipates Earning 16