Question

Paycheck, Inc. has a beta of 1.28. If the market return is

expected to be 13.90 percent and the risk-free rate is 6.90
percent, what is Paycheck’s risk premium? (Round your answer to 2
decimal place

Answer 1

The risk premium can be calculated by subtracting the risk-free rate from the expected market return.

Step-by-step explanation:

The risk premium is the difference between the expected return of an investment and the risk-free rate. To calculate the risk premium, we subtract the risk-free rate from the expected market return. In this case, the market return is expected to be 13.90% and the risk-free rate is 6.90%, so the risk premium is 13.90% - 6.90% = 7.00%.