Risk Premium Calculator

✖Return on investment (ROI) is the ratio of a profit or loss made in a fiscal year expressed in terms of an investment.ⓘ Return on Investment (ROI) [ROI]			+10% -10%
✖Risk-free return is the theoretical rate of return attributed to an investment with zero risk.ⓘ Risk Free Return [Rf]			+10% -10%

✖Risk Premium is the return in excess of the risk-free rate of return investment is expected to yield.ⓘ Risk Premium [RP]

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Formula

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Risk Premium

Formula

`"RP" = "ROI"-"Rf"`

Example

`"49988"="50000"-"12"`

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Risk Premium Solution

STEP 0: Pre-Calculation Summary

Formula Used

Risk Premium = Return on Investment (ROI)-Risk Free Return
RP = ROI-Rf
This formula uses 3 Variables

Variables Used

Risk Premium - Risk Premium is the return in excess of the risk-free rate of return investment is expected to yield.
Return on Investment (ROI) - Return on investment (ROI) is the ratio of a profit or loss made in a fiscal year expressed in terms of an investment.
Risk Free Return - Risk-free return is the theoretical rate of return attributed to an investment with zero risk.

STEP 1: Convert Input(s) to Base Unit

Return on Investment (ROI): 50000 --> No Conversion Required
Risk Free Return: 12 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

RP = ROI-Rf --> 50000-12

Evaluating ... ...

RP = 49988

STEP 3: Convert Result to Output's Unit

49988 --> No Conversion Required

FINAL ANSWER

49988 <-- Risk Premium

(Calculation completed in 00.004 seconds)

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Created by Team Softusvista

Softusvista Office (Pune), India

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Verified by Himanshi Sharma

Bhilai Institute of Technology (BIT), Raipur

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< 22 Investment Calculators

Portfolio Standard Deviation

Go Portfolio Standard Deviation = sqrt((Asset Weight)^2*Variance of Returns on Assets 1^2+(Asset Weight)^2*Variance of Returns on Assets 2^2+2*(Asset Weight*Asset Weight*Variance of Returns on Assets 1*Variance of Returns on Assets 2*Portfolio Correlation Coefficient))

Portfolio Variance

Go Portfolio Variance = (Asset Weight)^2*Variance of Returns on Assets 1^2+(Asset Weight)^2*Variance of Returns on Assets 2^2+2*(Asset Weight*Asset Weight*Variance of Returns on Assets 1*Variance of Returns on Assets 2*Portfolio Correlation Coefficient)

Jensen's Alpha

Go Jensen's Alpha = Annual Return on Investment-(Risk Free Interest Rate+Beta of the Portfolio*(Annual return of the market benchmark-Risk Free Interest Rate))

Compound Interest

Go Future Value of Investment = Principal Investment Amount*(1+(Annual Interest Rate/Number of Periods))^(Number of Periods*Number of Years Money is Invested)

Certificate of Deposit

Go Certificate of Deposit = Initial Deposit Amount*(1+(Annual Nominal Interest Rate/Compounding Periods))^(Compounding Periods*Number of Years)

Actuarial Method Unearned Interest Loan

Go Actuarial Method Unearned Interest Loan = (Number of Remaining Monthly Payments*Monthly Payment*Annual Percentage Rate)/(100+Annual Percentage Rate)

Equivalent Annual Annuity

Go Equivalent Annuity Cashflow = (Rate per Period*(Net Present Value (NPV)))/(1-(1+Rate per Period)^-Number of Periods)

Portfolio Expected Return

Go Portfolio Expected Return = Asset Weight*(Expected Return on Asset 1)+Asset Weight*(Expected Return on Asset 2)

Total Stock Return

Go Total Stock Return = ((Ending Stock Price-Initial Stock Price)+Dividend)/Initial Stock Price

Annuity Payment

Go Annuity Payment = (Rate per Period*Present Value)/(1-(1+Rate per Period)^-Number of Periods)

Value at Risk

Go Value at Risk = -Mean of Profit and Loss+Standard Deviation of Profit and Loss*Standard Normal Variate

Profitability Index

Go Profitability Index (PI) = (Net Present Value (NPV)+Initial Investment)/Initial Investment

Sharpe Ratio

Go Sharpe Ratio = (Expected Portfolio Return-Risk Free Rate)/Portfolio Standard Deviation

Capital Gains Yield

Go Capital Gains Yield = (Current Stock Price-Initial Stock Price)/Initial Stock Price

Treynor Ratio

Go Treynor's Ratio = (Expected Portfolio Return-Risk Free Rate)/Beta of the Portfolio

Average Return on Investment

Go Average Return = modulus(Total Value of Return)/Total Number of Returns

Information Ratio

Go Information Ratio = (Portfolio Return-Benchmark Return)/Tracking Error

Rate of Return

Go Rate of Return = ((Current Value-Original Value)/Original Value)*100

Straight Line Depreciation

Go Straight Line Depreciation = (Asset's Cost-Salvage)/Life

Portfolio Turnover Rate

Go Porfolio Turnover Rate = (Total Sales and Purchases of Shares/Average Net Assets)*100

Real Rate of Return

Go Real Rate of Return = ((1+Nominal Rate)/(1+Inflation Rate))-1

Risk Premium

Go Risk Premium = Return on Investment (ROI)-Risk Free Return

Risk Premium Formula

Risk Premium = Return on Investment (ROI)-Risk Free Return
RP = ROI-Rf

How to Calculate Risk Premium?

Risk Premium calculator uses Risk Premium = Return on Investment (ROI)-Risk Free Return to calculate the Risk Premium, Risk Premium is the return in excess of the risk-free rate of return investment is expected to yield. Risk Premium is denoted by RP symbol.

How to calculate Risk Premium using this online calculator? To use this online calculator for Risk Premium, enter Return on Investment (ROI) (ROI) & Risk Free Return (Rf) and hit the calculate button. Here is how the Risk Premium calculation can be explained with given input values -> 49988 = 50000-12.

FAQ

What is Risk Premium?

Risk Premium is the return in excess of the risk-free rate of return investment is expected to yield and is represented as RP = ROI-Rf or Risk Premium = Return on Investment (ROI)-Risk Free Return. Return on investment (ROI) is the ratio of a profit or loss made in a fiscal year expressed in terms of an investment & Risk-free return is the theoretical rate of return attributed to an investment with zero risk.

How to calculate Risk Premium?

Risk Premium is the return in excess of the risk-free rate of return investment is expected to yield is calculated using Risk Premium = Return on Investment (ROI)-Risk Free Return. To calculate Risk Premium, you need Return on Investment (ROI) (ROI) & Risk Free Return (Rf). With our tool, you need to enter the respective value for Return on Investment (ROI) & Risk Free Return 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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