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.

Below is a preview of the market risk premium template:

Download the Free Template

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

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)Capital Asset Pricing Model (CAPM)The Capital Asset Pricing Model (CAPM) is a model that describes the relationship between expected return and risk of a security. CAPM formula shows the return of a security is equal to the risk-free return plus a risk premium, based on the beta of that security, which analysts and investors use to calculate the acceptable rate of returnRate of ReturnThe Rate of Return (ROR) is the gain or loss of an investment over a period of time copmared to the initial cost of the investment expressed as a percentage. This guide teaches the most common formulas.  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.

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 TemplatesExcel & Financial Model TemplatesDownload free financial model templates - CFI's spreadsheet library includes a 3 statement financial model template, DCF model, debt schedule, depreciation schedule, capital expenditures, interest, budgets, expenses, forecasting, charts, graphs, timetables, valuation, comparable company analysis, more Excel templates
• PowerPoint Presentation Templates
• Transaction Document TemplatesTemplatesFree business templates to use in your personal or professional life. Templates include Excel, Word, and PowerPoint. These can be used for transactions, legal, financial modeling, financial analysis, business planning and business analysis.