Jerilu Markets has a beta of 1.09. The risk-free rate of return is 2.75 percent and...
Homework Answers
Calculate the risk premium as follows:
$$ \begin{aligned} \text { Risk premium } &=\operatorname{Beta} \times\left(\begin{array}{c} \text { Market rate of return }- \\ \text { Risk free return } \end{array}\right) \\ &=1.09 \times(9.80 \%-2.75 \%) \\ &=1.09 \times 0.0705 \\ &=0.0768 \text { or } 7.68 \% \end{aligned} $$
Therefore, the risk premium is \(7.68 \%\)
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