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What is the equity risk premium in the CAPM?

  1. A The expected market return less the risk-free rate
  2. B The company's dividend yield
  3. C The credit spread
  4. D The inflation rate
Answer

The expected market return less the risk-free rate

It is multiplied by beta to give the asset's risk premium, which is added to the risk-free rate to obtain the cost of equity.

All Investment Banking MCQs

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