Which of the following is not one of the three main determinants of the required rate of return on an asset?
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A. B. C. D.D
Although the Markowitz efficient frontier may be used in the process of deriving the risk premium on the asset, it is not in itself one of the three main determinants of the required rate of return on an asset. All investments are affected by the real risk-free rate of return and the expected rate of inflation, because those two factors determine the nominal risk-free rate of return. The nominal risk-free rate of return plus the risk premium on the asset is equal to the asset's required rate of return.