Market Risk Premium Template
Market Risk Premium Template
This market risk premium template will show you how to compute the market risk premium using the expected rate of return and the risk-free rate.
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The market risk premium is the additional return an investor will receive (or expects to receive) from holding a risky market portfolio instead of risk-free assets.
The market risk premium is part of the Capital Asset Pricing Model (CAPM), which analysts and investors use to calculate the acceptable rate of return. At the center of the CAPM is the concept of risk (volatility of returns) and reward (rate of returns). Investors always prefer to have the highest possible rate of return combined with the lowest possible volatility of returns.
The formula for Market Risk Premium is:
Market Risk Premium = Expected Rate of Return – Risk-Free Rate
Usually, a government bond yield is the instrument used to calculate risk-free assets, as it has little to no risk.
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Additional Resources
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
The Financial Modeling Certification
Analyst Certification FMVA® Program
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
The Financial Modeling Certification
Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.
A well rounded financial analyst possesses all of the above skills!
Additional Questions & Answers
CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.
In order to become a great financial analyst, here are some more questions and answers for you to discover:
- What is Financial Modeling?
- How Do You Build a DCF Model?
- What is Sensitivity Analysis?
- How Do You Value a Business?
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CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
The Financial Modeling Certification
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