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Exam (elaborations)

d076 Unit 3 EXAMS

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Module WGU D076
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How is risk defined in finance? - The possibility that the realized or actual return will differ from what we expect The nominal interest rate of an investment is 8%, and the inflation rate is 3%. What is the real interest rate? - 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 What is the rate at which the average price level of particular goods and services in an economy increases over a period of time? - Inflation rate What is the term for the return over the entire period that an investor owns a financial security? - Holding period return

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d076 Unit 3 EXAMS
How is risk defined in finance? - ✔✔The possibility that the realized or actual return will differ from
what we expect



The nominal interest rate of an investment is 8%, and the inflation rate is 3%. What is the real interest
rate? - ✔✔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



What is the rate at which the average price level of particular goods and services in an economy
increases over a period of time? - ✔✔Inflation rate



What is the term for the return over the entire period that an investor owns a financial security? - ✔✔
Holding period return



What is the term for the risk that changes in interest rates will impact the value of a bond? - ✔✔
Interest rate risk



What is used to measure total risk? - ✔✔Standard deviation



Which action reduces the future value of cash flows? - ✔✔Receive all cash flows later than expected.



Which example below is considered a market risk factor? - ✔✔An unexpected change in interest rate
occurs.

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