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If the risk-free rate of return is 1% and the expected return for financial asset is 10% what is the assets risk premium?
If the risk-free rate of return is 1% and the expected return for financial asset is 10% what is the assets risk premium?
Expert Solution
Solution :-
Risk free rate of return ( Rf ) = 1%
Expected return of financial asset ( Ra ) = 10%
Asset risk premium is calculated by subtracting risk free rate of return from expected rate of return of asset .
Asset risk premium :-
= Expected rate of return of asset - risk free rate of return
= 10% - 1%
= 9%
Asset risk premium is 9%.
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