CFA Practice Question

CFA Practice Question

Which of the following influence the overall required rate of return on alternative investments?

I. the economy's real RFR
II. variables that influence the nominal RFR
III. historical rates of return on such investments
IV. the investments' risks
A. I, II & IV
B. I, III & IV
C. II, III & IV
Explanation: The overall required rate of return on alternative investments is determined by the following three variables:
1. the economy's real RFR, which is influenced by the investment opportunities in the economy
2. variables that influence the nominal RFR, which include short-run ease or tightness in the capital market and the expected rate of inflation
3. the risk of an investment

User Contributed Comments 1

User Comment
ontrack Historical rates (#3) are not a factor. So only option remaining is A
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