Final answer:
The rate of return encompasses the discount rate, hurdle rate, and opportunity cost of capital, reflecting an investment's expected profitability adjusted for time, inflation, and risk.
Step-by-step explanation:
The rate of return is referred to by several names depending on the context, including the discount rate, hurdle rate, and opportunity cost of capital. When a financial investor decides on an interest rate for valuing future payments, this rate represents the return on other investment opportunities, arguably making it the opportunity cost of investing financial capital. Additionally, the rate includes a risk premium if the investment is deemed particularly risky. For instance, an investor may choose a 15% interest rate to value future payments, factoring in the opportunity cost and the risks associated with the investment.
In practice, the rate of return reflects compensation for postponing consumption, an adjustment for potential inflation, and a premium for the risk level of the borrower. This chosen rate affects expectations about future profits, whether through interest payments, capital gains, or increased profitability. Thus, the correct answer to the given question is that the rate of return is also called the discount rate, hurdle rate, and opportunity cost of capital, which corresponds to option (c).