The market has an expected rate of return of 12.6 percent. The long-term government bond is expected to yield 5.8 percent and th

Question

4 years ago

10

e U.S. Treasury bill is expected to yield 3.3 percent. The inflation rate is 3.2 percent. What is the market risk premium?

1 answer:

natulia [17] · Answer 1 · 2021-11-11T01:43:56+03:00

Answer:

The market risk premium is 9.3%

Explanation:

Market risk premium can be obtained by calculating the difference between the expected return on the market and the risk-free rate.

In the question given, the risk rate fee refers to the US treasury bill.

Therefore,

Market risk premium = market rate-risk free rate

= (12.6% - 3.3%)

= 9.3%

So, in the question given, the market risk premium is

9.3%