Company Risk Premium 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%
B) 12.00%
C) 22.91%
D) 34.92%

Question

Quizplus · Accepted Answer

The company's risk premium is calculated using the formula: Risk Premium = Beta * (Market Return - Risk-Free Rate). Substituting the given values: Risk Premium = 2.91 * (16% - 4%) = 2.91 * 12% = 34.92%.

Company Risk Premium a Company Has a Beta of 2