Welcome to Westonci.ca, where curiosity meets expertise. Ask any question and receive fast, accurate answers from our knowledgeable community. Experience the ease of finding reliable answers to your questions from a vast community of knowledgeable experts. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform.
Sagot :
The risk-free rate is 3%. A market risk premium in finance and economic is used to measure how much the level of risk.
A risk premium means a measure of excess return that is used by an individual to compensate being subjected to an improved degree of risk. A risk premium is the common definition being the expected risky return less the risk-free return.
To find the amount of risk free rate, we can calculate it use this formula:
ER = rf + β (rm - rf)
Where,
ER = Expected Return = 14.7% = 0.147
rf = Risk free rate
β = beta = 1.3
rm = Return market = 12% = 0.12
Hence,
0.147 = rf + 1.3 (0.12 - rf)
0.147 = rf + 0.156 - 1.3rf
0.147 - 0.156 = -0.3 rf
-0.009 = -0.3 rf
rf = 0.03
Thus, the risk-free rate is 3%.
Learn more risk premium, here brainly.com/question/28235630
#SPJ4
Thank you for your visit. We are dedicated to helping you find the information you need, whenever you need it. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Westonci.ca is your go-to source for reliable answers. Return soon for more expert insights.