Solution:
The risk
premium equals the expected
return on the risky investment
minus the risk-free return.
In finance, the risk premium refers to the amount by which an asset's expected rate of return exceeds the risk-free interest rate.
The difference between a rate of return and the risk free rate of return is a risk premium.
When measuring risk, a common approach is to compare the risk-free return on T-bills(7%) and the risky return on other investments(16%)
Risk premiums may be calculated for a particular security, a class of securities, or a market.
Risk premium = Expected return on risky investment - Risk free investment
= 16% - 7%
Risk premiums= 9
In stock market XYZ company is offering 16% annual return on bonds, however, Treasury Bills are providing 7% annual return. Calculate the risk premium if an investor invest in XYZ company.
Solution:
Risk premium = Expected return on risky investment - Risk free investment
plz elaborate it.
hum konsi cheez ko kahan rakahain gay formula main?
concept bhi explain kar dain. plz
________________
Mehreen Humayun
4th Semester, MBA(Banking)
Distance Learning Student
Quality in Everything We Do
vuZs Banking Group: http://groups.google.com/group/vuzs_banking?hl=en
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