The rate of required return to cover the risk of investment, in absence of inflation is classified as ____________?
Correct answer: A. real rate of return
- A. real rate of return
- B. required rate of return
- C. nominal rate of return
- D. none of above
Explanation
The real rate of return excludes the effect of inflation and reflects the underlying return required for the investment’s risk and use of funds. A nominal rate includes inflation, so option c does not fit the stated condition.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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