USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You are provided with the following information:
Nominal return on risk-free asset = 4.5%
Expected return for asset i = 12.75%
Expected return on the market portfolio = 9.25%
-Refer to Exhibit 1.9. Calculate the risk premium for asset i.
A) 4.5%
B) 8.25%
C) 4.75%
D) 3.5%
E) 0%

Question

Quizplus · Accepted Answer

The risk premium for asset i can be calculated as the difference between its expected return (12.75%) and the risk-free rate (4.5%). 
Risk premium = 12.75% - 4.5% = 8.25%. 
Therefore, choice B is the correct answer.