Market Risk Premium Calculator

✖Expected Equity Market Rate refers to the anticipated rate of return that investors expect to earn from investing in equities or stocks within a specific market.ⓘ Expected Equity Market Rate [EEMR]			+10% -10%
✖The Risk Free Rate is the theoretical rate of return of an investment with zero risks.ⓘ Risk Free Rate [R_f]			+10% -10%

✖Market Risk Premium is the rate of return on a risky investment.ⓘ Market Risk Premium [MRP]

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Formula

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Market Risk Premium

Formula

`"MRP" = "EEMR"-"R"_{"f"}`

Example

`"18.7"="19"-"0.3"`

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Market Risk Premium Solution

STEP 0: Pre-Calculation Summary

Formula Used

Market Risk Premium = Expected Equity Market Rate-Risk Free Rate
MRP = EEMR-R_f
This formula uses 3 Variables

Variables Used

Market Risk Premium - Market Risk Premium is the rate of return on a risky investment.
Expected Equity Market Rate - Expected Equity Market Rate refers to the anticipated rate of return that investors expect to earn from investing in equities or stocks within a specific market.
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

Expected Equity Market Rate: 19 --> No Conversion Required
Risk Free Rate: 0.3 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

MRP = EEMR-R_f --> 19-0.3

Evaluating ... ...

MRP = 18.7

STEP 3: Convert Result to Output's Unit

18.7 --> No Conversion Required

FINAL ANSWER

18.7 <-- Market Risk Premium

(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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< 20 Risk Management Calculators

Risk Adjusted Return on Capital

Go Risk Adjusted Return on Capital = (Revenue-Expenses-Expected Loss+Income From Capital)/Capital Cost

Sortino Ratio

Go Sortino Ratio = (Expected Portfolio Return-Risk Free Rate)/Standard Deviation of Downside

Maximum Drawdown

Go Maximum Drawdown = ((Trough Value-Peak Value)/Peak Value)*100

Modigliani-Modigliani Measure

Go Modigliani-Modigliani measure = Return on Adjusted Portfolio-Return on Market Portfolio

Interest Rate Risk

Go Interest Rate Risk = (Original Price-New Price)/New Price

Sterling Ratio

Go Sterling Ratio = (Compound Annual Growth Rate/(Average Maximum Drawdown-10))*-1

Risk Tolerance

Go Risk Tolerance = (Public Equity Exposure*0.35)/Monthly Gross Income

Market Risk Premium

Go Market Risk Premium = Expected Equity Market Rate-Risk Free Rate

Basis Risk

Go Basis Risk = Future Price of Contract-Spot Price of Hedged Asset

Credit Value at Risk

Go Credit Value at Risk = Worst Credit Loss-Expected Credit Loss

Economic Capital

Go Economic Capital = Earnings at Risk/Required Rate of Return

Calmar Ratio

Go Calmar Ratio = (Average Rate of Return/Maximum Drawdown)*-1

Upside/Downside Ratio

Go Upside/Downside Ratio = Advancing Issues/Declining Issues

Credit Spread

Go Credit Spread = Corporate Bond Yield-Treasury Bond Yield

Probability of Default Regression Model

Go Probability of Default = 1/(1+exp(-Linear Combination))

Default Risk Premium

Go Default Risk Premium = Interest Rate-Risk Free Rate

Pain Ratio

Go Pain Ratio = Effective Return/Pain Index

Risk Exposure

Go Risk Exposure = Risk Impact*Probability

Risk Determination

Go Risk = Risk Impact*Likelihood

Loss Given Default

Go Loss Given Default = 1-Recovery Rate

Market Risk Premium Formula

Market Risk Premium = Expected Equity Market Rate-Risk Free Rate
MRP = EEMR-R_f

What Is Market Risk Premium?

The market risk premium (MRP) is the difference between the expected return on a market portfolio and the risk-free rate.
The market risk premium is equal to the slope of the security market line (SML), a graphical representation of the capital asset pricing model (CAPM). CAPM measures the required rate of return on equity investments, and it is an important element of modern portfolio theory (MPT) and discounted cash flows (DCF) valuation.

How to Calculate Market Risk Premium?

Market Risk Premium calculator uses Market Risk Premium = Expected Equity Market Rate-Risk Free Rate to calculate the Market Risk Premium, Market Risk Premium describes the relationship between returns from an asset portfolio and treasury bond yields. Market Risk Premium is denoted by MRP symbol.

How to calculate Market Risk Premium using this online calculator? To use this online calculator for Market Risk Premium, enter Expected Equity Market Rate (EEMR) & Risk Free Rate (R_f) and hit the calculate button. Here is how the Market Risk Premium calculation can be explained with given input values -> 17.2 = 19-0.3.

FAQ

What is Market Risk Premium?

Market Risk Premium describes the relationship between returns from an asset portfolio and treasury bond yields and is represented as MRP = EEMR-R_f or Market Risk Premium = Expected Equity Market Rate-Risk Free Rate. Expected Equity Market Rate refers to the anticipated rate of return that investors expect to earn from investing in equities or stocks within a specific market & The Risk Free Rate is the theoretical rate of return of an investment with zero risks.

How to calculate Market Risk Premium?

Market Risk Premium describes the relationship between returns from an asset portfolio and treasury bond yields is calculated using Market Risk Premium = Expected Equity Market Rate-Risk Free Rate. To calculate Market Risk Premium, you need Expected Equity Market Rate (EEMR) & Risk Free Rate (R_f). With our tool, you need to enter the respective value for Expected Equity Market Rate & Risk Free Rate and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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