STEP 0: Pre-Calculation Summary
Formula Used
Default Risk Premium = Interest Rate-Risk Free Rate
DRP = Ri-Rf
This formula uses 3 Variables
Variables Used
Default Risk Premium - The Default Risk Premium (DRP) measures the incremental return that investors require as compensation for undertaking the risk of holding a risky security, such as a corporate bond.
Interest Rate - Interest Rate is the amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of assets.
Risk Free Rate - The Risk Free Rate is the theoretical rate of return of an investment with zero risks.
STEP 1: Convert Input(s) to Base Unit
Interest Rate: 6 --> No Conversion Required
Risk Free Rate: 0.3 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
DRP = Ri-Rf --> 6-0.3
Evaluating ... ...
DRP = 5.7
STEP 3: Convert Result to Output's Unit
5.7 --> No Conversion Required
(Calculation completed in 00.004 seconds)
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## Credits

Created by Kashish Arora
Satyawati College (DU), New Delhi
Kashish Arora has created this Calculator and 50+ more calculators!
Verified by Vishnu K
BMS College of Engineering (BMSCE), Bangalore
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Default Risk Premium = Interest Rate-Risk Free Rate
DRP = Ri-Rf

## What is Default Risk Premium?

The Default Risk Premium (DRP) measures the incremental return that investors require as compensation for undertaking the risk of holding a risky security, such as a corporate bond.
The default risk premium (DRP) is a core component in the pricing of debt instruments and a critical part of understanding the risk-return tradeoff in investing.

## How to Calculate Default Risk Premium?

Default Risk Premium calculator uses Default Risk Premium = Interest Rate-Risk Free Rate to calculate the Default Risk Premium, The Default Risk Premium (DRP) measures the incremental return that investors require as compensation for undertaking the risk of holding a risky security, such as a corporate bond. Default Risk Premium is denoted by DRP symbol.

How to calculate Default Risk Premium using this online calculator? To use this online calculator for Default Risk Premium, enter Interest Rate (Ri) & Risk Free Rate (Rf) and hit the calculate button. Here is how the Default Risk Premium calculation can be explained with given input values -> 5.7 = 6-0.3.