Nystrand Corporation's stock has an expected return of 12.25%, a beta of 1.25, and is in equilibrium.If the risk-free rate is 5.00%, what is the market risk premium?
A) 5.80%
B) 5.95%
C) 6.09%
D) 6.25%
E) 6.40%

Question

Quizplus · Accepted Answer

The market risk premium is the difference between the expected return on the market and the risk-free rate. In this case, the expected return on the market is 12.25% and the risk-free rate is 5.00%, so the market risk premium is 12.25% - 5.00% = 7.25%.

Nystrand Corporation's Stock Has an Expected Return of 12