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The cost of equity for a firm is 20%. If the real interest rate is 5%, the inflation premium is 3%, and the market risk premium is 2%, what is the investment risk premium for the Firm
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The cost of equity for a firm is 20%. If the real interest rate is 5%, the inflation premium is 3%, and the market risk premium is 2%, what is the investment risk premium for the Firm

User Swithin
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Answer: 10%

Step-by-step explanation:

Investment risk premium is used to determine the returns an investor makes in excess of real interest rates, inflation and the market return;

= Cost of Equity - Real interest rate - Inflation premium - Market risk premium

= 20% - 5% - 3% - 2%

= 10%

User TractorPulledPork
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