Difference between actual return on stock and predicted return is considered as___________?
Correct answer: D. Random error
- A. Probability error
- B. Actual error
- C. Prediction error
- D. Random error
Explanation
In a return model, the difference between actual and predicted return is the residual or random error term. It captures stock-specific influences not explained by the prediction model.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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