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Calculation of the risk premium.

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General Management

Calculation of the risk premium.

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Risk Premium A risk premium is a return on investment above the riskfree rate that an investor needs to be compensated for investing in higherrisk investments Put simply the more risk an investment has the higher the return an investor needs to make it worthwhile Its also known as the risk premium equation of the default risk premium and is commonly used by investors and finance students who deal with the financial markets Risk premium is used to calculate how much a potential investor needs to be compensated for taking on extra risk when compared to a lower riskfree investment Typically the US treasury bill Tbill is used as the riskfree rate in the US but in finance theory the riskfree rate is any investment which has no risk Risk Premium Formula Risk Premium rarf ra Return on    See Answer
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