The risk premium is a measure of the riskiness of the overall economy in a domes

ID: 1107038 • Letter: T

Question

The risk premium is

a measure of the riskiness of the overall economy in a domestic country compared with a foreign country.

the amount an investment bank charges to guarantee an annuity that pays a fixed rate of return in the future.

the amount by which the expected return on a risky asset exceeds the return on an otherwise comparable safe asset.

the amount an investor must pay to insure his or her stock portfolio to protect against a fall in value.

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Which of the following is not part of M1?

Time deposits

Transaction accounts

Traveler's checks

Checking accounts

a measure of the riskiness of the overall economy in a domestic country compared with a foreign country.

the amount an investment bank charges to guarantee an annuity that pays a fixed rate of return in the future.

the amount by which the expected return on a risky asset exceeds the return on an otherwise comparable safe asset.

the amount an investor must pay to insure his or her stock portfolio to protect against a fall in value.

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Which of the following is not part of M1?

Time deposits

Transaction accounts

Traveler's checks

Checking accounts

1. the amount by which the expected return on a risky asset exceeds the return on an otherwise comparable safe asset.

2. Time deposits

M1 Measurement:

M1 = C + DD + OD

Here, C refers to currency and includes coins and paper notes held by the public.

DD refers to demand deposits of the people with the commercial banks. These are cheqable deposits which can be withdrawn or transferred on demand

OD are other deposits which includes:

(i) Demand deposits with RBI of public financial institutions like IDBI.

(ii) Demand deposits with RBI of foreign central banks and of the foreign governments.

(iii) Demand deposits of international financial institutions like IMF and World bank.

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