Security a and security b have similar risks. however, security a has a higher rate of return than security b. the return on security a minus the return on security b is referred to as which one of the following? a) market return b) abnormal return c) deviated return d) excess return e) real return

The correct answer to the following question is option D) Excess return.

Explanation:

The rate of return can be defined as the gain or loss( net) that a company or business gets on the investment over a defined period of time. Where for taking out the rate of return , the formula which can be used is -

Current value - Initial value / Initial value  x 100

The rate of return helps in evaluating what is the investment growth rate of a company on a year to year basis and what are changes in revenues that have occurred.

When two security's have similar risk and if one security has higher return than other , then the difference between them would be called excess return.

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Explanation: