D076 WGU Q&A WITH COMPLETE
SOLUTIONS UNIT3
How is risk defined in finance? - ✔✔The possibility that the realized or actual return will differ from
what we expect. (Risk is defined a s the possibility that the realized or actual return will differ from our
expected return.)
The nominal interest rate of an investment is 8%, and the inflation rate is 3%. What is the real interest
rate? - ✔✔5% (Real Rate = Nominal Rate - Inflation, so 8% - 3% = 5%)
What is another name for the cost of capital? - ✔✔Discount rate
What is the name for the minimum rate of return that an investor or lender will accept for investments?
- ✔✔Required rate of return
Which action reduces the future value of cash flows? - ✔✔Receive all cash flows later than expected.
(The later the cash flows are received, the lower the future value is.)
Which example below is considered a market risk factor? - ✔✔An unexpected change in interest rate
occurs. (This is a factor that affects everyone because it will cause the cost of borrowing and lending to
increase. This is a market risk factor.)
SOLUTIONS UNIT3
How is risk defined in finance? - ✔✔The possibility that the realized or actual return will differ from
what we expect. (Risk is defined a s the possibility that the realized or actual return will differ from our
expected return.)
The nominal interest rate of an investment is 8%, and the inflation rate is 3%. What is the real interest
rate? - ✔✔5% (Real Rate = Nominal Rate - Inflation, so 8% - 3% = 5%)
What is another name for the cost of capital? - ✔✔Discount rate
What is the name for the minimum rate of return that an investor or lender will accept for investments?
- ✔✔Required rate of return
Which action reduces the future value of cash flows? - ✔✔Receive all cash flows later than expected.
(The later the cash flows are received, the lower the future value is.)
Which example below is considered a market risk factor? - ✔✔An unexpected change in interest rate
occurs. (This is a factor that affects everyone because it will cause the cost of borrowing and lending to
increase. This is a market risk factor.)
