Which of the following is NOT part of the risk-adjusted return formula?

The risk-adjusted return formula evaluates the returns on an investment while taking into account the associated risks. This calculation helps investors assess performance relative to the risk borne.

Interest revenue is a key component of this formula, as it represents the income generated from an investment. Exposure at default is also included because it relates to the potential loss in a worst-case scenario, which is crucial for understanding the risk associated with a given investment. Closing fees, while external costs that may impact the net return, can also factor into the return calculations.

Capital requirement, on the other hand, does not directly affect the risk-adjusted return formula. Instead, it pertains to the minimum amount of capital that a bank or financial institution must hold as a safeguard to protect against potential losses. While capital requirements are important in assessing the overall risk profile of a financial institution or its ability to lend, they do not play a direct role in calculating the risk-adjusted return of an investment. This is why capital requirement is the correct choice as it does not belong to the risk-adjusted return formula.