Question

The term excess return refers to what?

1) The return on an investment that exceeds the expected return
2) The return on an investment that is lower than the expected return
3) The return on an investment that is equal to the expected return
4) The return on an investment that is negative

Answer 1

Excess return refers to the return on an investment that exceeds the expected return.

Step-by-step explanation:

The term excess return refers to the return on an investment that exceeds the expected return (Option 1). It is the difference between the actual rate of return and the expected rate of return on an investment. For example, if an investment has an expected return of 7% and it actually returns 10%, the excess return would be 3% (10% - 7%).