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liq [111]
3 years ago
10

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

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?
Business
1 answer:
natulia [17]3 years ago
5 0

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%

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