The anticipated return on the market for next period is 15 percent while the prevailing risk-free rate is 4 percent. Alpha Company has a beta equal to one-half of the market beta. The market risk premium is:
A) -11 percent.
B) -5.5 percent.
C) +5.5percent.
D) +11 percent.

Question

Quizplus · Accepted Answer

The market risk premium is calculated as the difference between the anticipated return on the market and the risk-free rate: 15% - 4% = 11%.

The Anticipated Return on the Market for Next Period Is