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12.5%
Risk-Free Rate= Norminal Rate Of Return - Risk Premiums
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
Risk free rate of return or risk free return is calculated as the return on government securities of the same maturity.
the beta is 1 the beta is 1
12.5%
12.5%
0.15%
Risk-Free Rate= Norminal Rate Of Return - Risk Premiums
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
Risk free rate of return or risk free return is calculated as the return on government securities of the same maturity.
Risk free rate of return in Pakistan for 2012 is "12%". The risk free rate is declared by the State Bank of Pakistan after the specific period. The 3-month Govt. Treasury Bills' rate is taken as proxy for the risk free rate of return.
If the required rate of return is 11 the risk free rate is 7 and the market risk premium is 4 If the market risk premium increased to 6 percent what would happen to the stocks required rate of return?
The risk free rate of return is a rate an investor will expect with zero risk over a specified period of time. In order to calculate risk free rate you need to use CAPM model formula ra = rrf + Ba (rm-rrf), where rrf is risk free rate, Ba is beta of security and Rm is market return.
12.5% 12.5%
The market risk premium is measured by the market return less risk-free rate. You can calculate the market risk premium as market risk premium is equal to the expected return of the market minus the risk-free rate.
Require Rate of Return is formulated as: Riskfree Rate + Beta(Risk Premium) Required Rate of Return = 4.25 + 1.4 (5.50) = 11.95%