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Risk Premium Formula

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Risk Premium is the return in excess of the risk-free rate of return investment is expected to yield. Check FAQs

RP = ROI - Rf return

RP - Risk Premium?ROI - Return on Investment (ROI)?Rf_return - Risk Free Return?

Risk Premium Example

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With units

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

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

Here is how the Risk Premium equation looks like.

49988 = 50000 - 12

49988 = 50000 - 12

49988 = 50000 - 12

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Risk Premium Solution

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

FIRST Step Consider the formula

RP = ROI - Rf return

Next Step Substitute values of Variables

∴

RP = 50000 - 12

Next Step Prepare to Evaluate

∴

RP = 50000 - 12

LAST Step Evaluate

∴

RP = 49988

Risk Premium Formula Elements

Variables

Risk Premium

Risk Premium is the return in excess of the risk-free rate of return investment is expected to yield.

Symbol: RP

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Risk Premium

Return on Investment (ROI)

Return on investment (ROI) is the ratio of a profit or loss made in a fiscal year expressed in terms of an investment.

Symbol: ROI

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Return on Investment (ROI)

Risk Free Return

Risk Free Return is the theoretical rate of return attributed to an investment with zero risk.

Symbol: Rf_return

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Risk Free Return

Other formulas in Important Formulas of Investment category

Go Certificate of Deposit

CD = P0 Deposit \cdot {(1 + (\frac{r Annual}{n c}))}^{n c \cdot n t}

Go Compound Interest

FV = A \cdot {(1 + (\frac{i}{n}))}^{n \cdot T}

Go Capital Gains Yield

CGY = \frac{P c - P0}{P0}

Go Total Stock Return

TSR = \frac{(P1 - P0) + D}{P0}

How to Evaluate Risk Premium?

Risk Premium evaluator uses Risk Premium = Return on Investment (ROI)-Risk Free Return to evaluate the Risk Premium, Risk Premium is the return in excess of the risk-free rate of return investment is expected to yield. Risk Premium is denoted by RP symbol.

How to evaluate Risk Premium using this online evaluator? To use this online evaluator for Risk Premium, enter Return on Investment (ROI) (ROI) & Risk Free Return (Rf_return) and hit the calculate button.

FAQs on Risk Premium

What is the formula to find Risk Premium?

The formula of Risk Premium is expressed as Risk Premium = Return on Investment (ROI)-Risk Free Return. Here is an example- 49988 = 50000-12.

How to calculate Risk Premium?

With Return on Investment (ROI) (ROI) & Risk Free Return (Rf_return) we can find Risk Premium using the formula - Risk Premium = Return on Investment (ROI)-Risk Free Return.

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Risk Premium Formula

Risk Premium Example

Risk Premium Solution

Risk Premium Formula Elements

Other formulas in Important Formulas of Investment category

How to Evaluate Risk Premium?

FAQs on Risk Premium

Variable Name