Company Risk Premium A company has a beta of 4.5. If the market return is expected to be 14 percent and the risk-free rate is 7 percent, what is the company's risk premium?
A) 7.0%
B) 25.5%
C) 31.5%
D) 38.5%

Question

Quizplus · Accepted Answer

The company's risk premium is calculated using the formula: Risk Premium = Beta * (Market Return - Risk-Free Rate). Here, it is 4.5 * (14% - 7%) = 31.5%.

Company Risk Premium a Company Has a Beta of 4