ONE OF THE KEY COMPONENTS OF THE DISCOUNT RATE IS THE ADDITIONAL RETURN REQUIRED BY INVESTORS FROM INVESTING IN NOMINAL DEFAULT-FREE INVESTMENT THAT IS ABOVE THE REAL DEFAULT-FREE INVESTMENT, BECAUSE FUTURE NOMINAL PAYMENTS WILL BE AFFECTED BY INFLATION

1. - CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R50 ECONOMICS AND INVESTMENT MARKETS Q BANK
CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R50 ECONOMICS AND INVESTMENT MARKETS Q BANK

1. B is correct. One of the key components of the discount rate is the additional return required

by investors from investing in nominal default-free investment that is above the real default-

free investment, because future nominal payments will be affected by inflation. Section 2.

LO.a.