FormulaDen.com

Physics Chemistry Math Chemical Engineering Civil Electrical Electronics Electronics and Instrumentation Materials Science Mechanical Production Engineering Financial Health

Default Risk Premium Formula

Fx Copy

LaTeX Copy

The Default Risk Premium (DRP) measures the incremental return that investors require as compensation for undertaking the risk of holding a risky security, such as a corporate bond. Check FAQs

DRP = R i - R f

DRP - Default Risk Premium?R_i - Interest Rate?R_f - Risk Free Rate?

Default Risk Premium Example

With values

With units

Only example

Here is how the Default Risk Premium equation looks like with Values.

Here is how the Default Risk Premium equation looks like with Units.

Here is how the Default Risk Premium equation looks like.

5.7 = 6 - 0.3

5.7 = 6 - 0.3

5.7 = 6 - 0.3

Tip: Use pencil ( Pencil

) icon above to edit Input Values and Units.

Calculate

Recalculate

Solution

Copy

Reset

You are here -

Home » Category

Financial » Category

Common Probability Distribution » Category

Risk Management » fx Default Risk Premium

Default Risk Premium Solution

Follow our step by step solution on how to calculate Default Risk Premium?

FIRST Step Consider the formula

DRP = R i - R f

Next Step Substitute values of Variables

∴

DRP = 6 - 0.3

Next Step Prepare to Evaluate

∴

DRP = 6 - 0.3

LAST Step Evaluate

∴

DRP = 5.7

Default Risk Premium Formula Elements

Variables

Default Risk Premium

The Default Risk Premium (DRP) measures the incremental return that investors require as compensation for undertaking the risk of holding a risky security, such as a corporate bond.

Symbol: DRP

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Default Risk Premium

Interest Rate

Interest Rate is the amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of assets.

Symbol: R_i

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Interest Rate

Risk Free Rate

The Risk Free Rate is the theoretical rate of return of an investment with zero risks.

Symbol: R_f

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Risk Free Rate

Other formulas in Risk Management category

Go Sortino Ratio

S = \frac{R p - R f}{σ d}

Go Modigliani-Modigliani Measure

M 2 = R ap - R mkt

Go Maximum Drawdown

MDD = (\frac{V trough - V peak}{V peak}) \cdot 100

Go Upside/Downside Ratio

R up/down = \frac{AI}{DI}

How to Evaluate Default Risk Premium?

Default Risk Premium evaluator uses Default Risk Premium = Interest Rate-Risk Free Rate to evaluate the Default Risk Premium, The Default Risk Premium (DRP) measures the incremental return that investors require as compensation for undertaking the risk of holding a risky security, such as a corporate bond. Default Risk Premium is denoted by DRP symbol.

How to evaluate Default Risk Premium using this online evaluator? To use this online evaluator for Default Risk Premium, enter Interest Rate (R_i) & Risk Free Rate (R_f) and hit the calculate button.

FAQs on Default Risk Premium

What is the formula to find Default Risk Premium?

The formula of Default Risk Premium is expressed as Default Risk Premium = Interest Rate-Risk Free Rate. Here is an example- 5.7 = 6-0.3.

How to calculate Default Risk Premium?

With Interest Rate (R_i) & Risk Free Rate (R_f) we can find Default Risk Premium using the formula - Default Risk Premium = Interest Rate-Risk Free Rate.

Let Others Know

✖

Facebook

Twitter

Copied!

: Value
: Unit

Default Risk Premium Formula

Default Risk Premium Example

Default Risk Premium Solution

Default Risk Premium Formula Elements

Other formulas in Risk Management category

How to Evaluate Default Risk Premium?

FAQs on Default Risk Premium

Variable Name