the expected return on karol co stock is 15 percent. if the risk-free rate is 7 percent and the beta of karol co is 1.5, then what is the risk premium on the market?

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20-12-2022
Business

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the expected return on karol co stock is 15 percent. if the risk-free rate is 7 percent and the beta of karol co is 1.5, then what is the risk premium on the market?

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akankshasharma92 akankshasharma92 · Answer 1 · 2022-12-23T02:38:32-05:00

Expected rate = Beta*Market Risk Premium + Risk Free Rate Market risk premium = 16.5 = 5 + 1.5 (16,5-5)/1.5 is the market risk premium. =7.67%(Approx)

The risk-free rate of return, sometimes abbreviated to the "risk-free rate," is the rate of return on a fictitious investment with regular payments made over a certain period of time and assumed to fulfill all financial commitments. Any other investment with any risk will need to have a greater rate of return in order to persuade investors to keep it since the risk-free rate can be acquired with no risk. Market investors frequently use the yield to maturity on a risk-free bond issued by a government of the same currency, whose risks of default are so minimal as to be insignificant,

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