Question

A risk premium is a measure calculated to reflect the riskiness of future profits. Subtracted from the discount rate when calculating the present value of a future stream of profits. Lower the more risky the future stream of profits. An additional compensation paid to the workers of a business enterprise.

Answer 1

A risk premium is a measure calculated to reflect the riskiness of future profits. is The metric denotes the difference between the expected return on a market portfolio and the risk-free rate. The value of a firm is larger the lower is the risk premium used to compute the firm's value.