A company has a beta of 2.91. If the market return is expected to be 16 percent and the risk-free rate is 4 percent, what is the company's risk premium?
A) 11.64 percent
B) 12.00 percent
C) 22.91 percent
D) 34.92 percent

Question

Quizplus · Accepted Answer

The risk premium is calculated as the beta multiplied by the market risk premium (market return minus risk-free rate). Here, it is 2.91 * (16% - 4%) = 34.92%.

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