Asked by
briana romero
on Oct 20, 2024
Verified
The term excess return refers to ________.
A) returns earned illegally by means of insider trading
B) the difference between the rate of return earned and the risk-free rate
C) the difference between the rate of return earned on a particular security and the rate of return earned on other securities of equivalent risk
D) the portion of the return on a security that represents tax liability and therefore cannot be reinvested
Excess Return
The return on an investment over the risk-free rate, indicating the extra amount earned for taking on risk.
Risk-Free Rate
The theoretical return on an investment with zero risk, typically considered as the return on government bonds.
Rate of Return
The enhancement or reduction in an investment's value across a specific duration, expressed as a portion of the investment's initial expense in percentage terms.
- Comprehend the importance of abnormal returns and the method of their computation.
Verified Answer
TM
Learning Objectives
- Comprehend the importance of abnormal returns and the method of their computation.