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 = R_{1}P_{1} + R_{2}P_{2} + …. + R_{n}P_{n}

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.