Consider the case of a simple one-period framework. If i = 12.30 per cent and k = 13.87 per cent, what is the risk premium on the corporate loan (round to two decimals)?

Question

Quizplus · Accepted Answer

The risk premium is the difference between the expected return on the risky asset and the risk-free rate. In this case, the expected return on the corporate loan is 13.87% and the risk-free rate is 12.30%. Therefore, the risk premium is 13.87% - 12.30% = 1.57%.

Consider the Case of a Simple One-Period Framework ×\times× 1230% = 00171 = 1

Consider the Case of a Simple One-Period Framework $\times$ 1230% = 00171 = 1