1. When an investor sets its required rate of return, there are three factors taken into consideration: the real risk-free rate, the inflation premium, and the risk premium. The risk premium consists of two types of risk: Business Risk Premium and Financial Risk Premium. Please define each of these components which are used to determine a firms required rate of return and explain why it is important for a company to consider each of these types of risk when setting the discount rate (aka the required rate of return).