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The expected return on the market portfolio is 12%, and the relevant risk-free rate is 4.2%. What is the equity premium?

User Eyalw
by
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1 Answer

4 votes

Answer:

7.8%

Step-by-step explanation:

The expected return on the market portfolio is 12 percent

The risk free rate is 4.2 percent

Therefore the equity premium can be calculated as follow

= expected return - risk free rate

= 12% - 4.2%

= 7.8%

Hence the equity premium is 7.8%

User Andrew Boes
by
8.2k points

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