According to the fundamental view of risk, an individual's required rate of return is determined at least in part by all of the following factors EXCEPT:
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A. B. C. D.D
Beta risk, or the riskiness of the stock as viewed by a well-diversified stockholder, is used in the systematic view of risk. The fundamental view of risk views required return as (1 + real rate)(1 + expected inflation rate)(1 + risk premium) - 1. The risk premium is a function of total risk. (Total risk = business risk + financial risk + liquidity risk + exchange rate risk + country risk.)
The preference consumers have for current consumption is a component of the real risk-free rate. The relative ease or tightness in the capital markets is a component of the inflation rate. Both the real-risk free rate and the inflation rate are components of the total return. Under the fundamental view of risk, business risk is part of the risk premium.