# Calculating market risk premium

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What is the market risk premium if the risk free rate is 5% and the expected market return is given as follows

State of Nature Probability Return

Boom 20% 30%

Average 70% 15%

Recession 10% -5%

https://brainmass.com/math/consumer-mathematics/calculating-market-risk-premium-328813

#### Solution Preview

Expected Return=Probability of boom * Return in case of boom + Probability of average * ...

#### Solution Summary

The solution describes the steps to calculate market risk premium.

$2.49