413.6
6.What three components go into the required rate of return (interest rate)? Explain the components. (6)
There is a real (risk-free) return: some compensation for parting with your money for some time even if you are sure to get it back.
There is a component for inflation: some return to keep up with rising prices--to make me at least as well off at the end of the period (in terms of purchasing power) as I am today.
Finally, there is a component for risk: some compensation for the chance that I might not get my money back.