Respuesta :
To calculate the expected risk premium on a stock, one must subtract the risk-free rate from the stock’s expected return. the correct answer is D.
What purpose does the risk-free rate serve?
The prospective rate of return on a risk-free investment is known as the risk-free rate. It serves as the standard for other investments with risk components as a result. Government bond yields are some of the most often used risk-free rates for investments.
One must deduct the risk-free rate from the expected return on a stock in order to determine the projected risk premium.
How is the risk-free rate used to calculate the risk premium?
The risk premium calculation formula is straightforward: The risk-free rate, which is simply the current interest rate paid on risk-free investments like government bonds and Treasuries, can be calculated by deducting the projected return on a certain asset from the risk-free rate.
Your question is incomplete but most probably your full question was
To calculate the expected risk premium on a stock, one must subtract the_________ from the stock's expected return.
a) variance
b) expected market rate of return
c) Standard deviation
d) risk free rate
e) Intiation rate
Learn more about risk-free rate: brainly.com/question/28168891
#SPJ4
