Question

1.[ True / False ] The return of a risky asset can be treated as a random variable, and an investment opportunity can be defined by its return distribution.

2.[ True / False ] By estimating the expected return, variance, skewness, and kurtosis of an asset, we can have a rough idea of how its return distribution looks like

3. [ True / False ] The real rate of interest can be understood as the price on money and is determined by the supply and demand for money just like the prices of any other goods and services

Answer 1

1.True,

Because it's risky and it's highly volatile. Its return is in a wide range of predictions. So, the return of a risky asset can be treated as a random variable, and opportunity is based on past return distribution.

2.True,

By plotting all the things we can have an idea of expected return. Because all of this is graphical representation of it

3.True,

Interest rate is decided by demand and supply. However, real interest rate considers inflation as well. but still we can say that it is determined by demand supply