Equity Risk Premium Template

Equity Risk Premium Template

This equity risk premium template shows you how to calculate equity risk premium given the risk-free rate, beta of stock, and expected return on the market.

Here is a screenshot of the equity risk premium template:

Download the Free Template

Enter your name and email in the form below and download the free template now!

Equity Risk Premium is the difference between returns on equity/individual stock and the risk-free rate of return. The risk-free rate of return, for example, can be benchmarked to longer-term government bonds assuming zero default risk by the government. It is the excess return a stock pays to the holder over and above the risk-free rate for the risk the holder is taking. It is the compensation to the investor for taking a higher level of risk and investing in equity rather than risk-free securities.

Calculating Equity Risk Premium

The Formula:

Equity Risk Premium (on the Market) = Rate of Return on the Stock Market − Risk-free Rate

Here, the rate of return on the market can be taken as the return on the concerned index of the relevant stock exchange – i.e., the Dow Jones Industrial Average in the United States. Often, the risk-free rate can be taken as the current rate on long-term government securities.

More Free Templates

For more resources, check out our business templates library to download numerous free Excel modeling, PowerPoint presentation, and Word document templates.

• Excel Modeling Templates
• PowerPoint Presentation Templates
• Transaction Document Templates