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What typically is used to calculate the opportunity cost of capital on a risk-free investment?
The opportunity cost of capital for a risk-free investment is typically calculated using the return on a benchmark risk-free asset, such as government treasury bonds or bills. This rate reflects the compensation investors would expect for forgoing other investment opportunities with similar risk levels. Additionally, the risk-free rate can be adjusted for inflation to determine the real opportunity cost. Ultimately, it serves as a baseline to evaluate the potential returns of other investments.
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Why are certificates of deposits?
Certificates of deposits are important because they are time deposits, which are similar to savings accounts. They are virtually riskfree because they are insured.
Why are certificates of deposits important?
Certificates of deposits are important because they are time deposits, which are similar to savings accounts. They are virtually riskfree because they are insured.
If beta coefficient is 1.4 and the risk free rate is 4.25 and the market risk premium is 5.50 what is the required rate of return?
Require Rate of Return is formulated as: Riskfree Rate + Beta(Risk Premium) Required Rate of Return = 4.25 + 1.4 (5.50) = 11.95%
Risk free rate is 5 and the market risk premium is 6 What is the expected return for the overall stock market What is the required rate of return on a stock that has a beta of 1.2?
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
