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24 July, 10:55

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%

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  1. 24 July, 12:15
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    a. The market risk premium is 5.80%

    Explanation:

    Expected rate=risk free rate+Beta*market risk premium

    12.25=5+1.25*market risk premium

    market risk premium = (12.25-5) / 1.25

    Market risk premium is the difference between the expected return on a market portfolio and the risk-free rate.

    =5.8%
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