| excess return | Rate of return in excess of the risk-free rate.
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| nominal interest rate | The interest rate in terms of nominal (not adjusted for purchasing power) dollars.
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| real interest rate | The excess of the interest rate over the inflation rate. The growth rate of purchasing power derived from an investment.
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| risk aversion | A risk-averse investor will consider risky portfolios only if they provide compensation for risk via a risk premium. A risk-neutral investor finds the level of risk irrelevant and considers only the expected return of risk prospects. A risk lover is willing to accept lower expected returns on prospects with higher amounts of risk.
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| risk premium | An expected return in excess of that on risk-free securities. The premium provides compensation for the risk of an investment.
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| risk-free rate | The interest rate that can be earned with certainty.
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