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