Market Risk Premium Calculator

The Market risk premium Calculator helps you calculate the market risk premium effortlessly by simply inserting needed values. It is the additional return an investor receives from investing in a risky market portfolio rather than investing in a risk-free asset. It is basically the difference between the expected rate of return commensurate with the level of risk and the risk-free rate of return.

As we know, there is basically a difference between the two returns. Therefore, the formula for calculating the Market Risk Premium is:

Market Risk Premium = Expected Rate of Return – Risk-Free Rate of Return

Market Risk Premium Calculator

How to Calculate using Calculator?

To calculate the market risk premium, the user only has to provide the following data.

Expected Rate of Return

To calculate the expected rate of return, consider the following formula:

Expected Rate of Return = R1P1 + R2P2 + …. + RnPn

where R = Expected return for the given period.

P = Probability of return being achieved.

n = Number of periods.

Risk-Free Rate

The prevailing rate of return for government bonds / Treasury bonds with different maturities. The analyst/investor can choose the maturity so that their requirements for calculation/analysis purposes match.

Excel Calculator – Market Risk Premium

You can also download our excel based calculator for market risk premium.

Excel Calculator for Market Risk Premium (108 downloads )


Sanjay Borad

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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