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 the market portfolio.
A) 4.5%
B) 8.25%
C) 4.75%
D) 3.5%
E) 0%

Question

Quizplus · Accepted Answer

The risk premium for the market portfolio is calculated by subtracting the nominal return on the risk-free asset from the expected return on the market portfolio. Therefore, 9.25% - 4.5% = 4.75%.