--%>

What is the market risk premium

What is the market risk premium within Spain at the present time – the number that I have to use in the valuations?

E

Expert

Verified

This is impossible to talk of “the” market premium for Spain. A market risk premium is the incremental return an investor demands by shares, above the return on risk-free bonds. Here is a market risk premium of each investor, but this is impossible to talk about a market risk premium of the market.

So as to be able to talk regarding a market risk premium of the market it would be essential that all investors had identical one. Conversely, the term “risk premium” is used to describe four different concepts: the incremental needed return above fixed-income, the expectation of differential return, the implicit market risk premium and the differential historical return.

   Related Questions in Corporate Finance

  • Q : Working Capital - Current Assets and

    I do not know the meaning of Working Capital Requirements. I think this should be same to Working Capital (Current Assets – Current Liabilities). There am I right?

  • Q : Investors are irrational or naive

    Explain how companies with substandard financial history can draw the attention of investors. Are investors irrational or naive?

  • Q : Define stock variable Stock variable :

    Stock variable: It is a variable whose value is measured or evaluated at a point of time.

  • Q : Long-Term Financing Needed Long-Term

    Long-Term Financing Needed : - At year-end 2012, total assets for Ambrose Inc. were $1.2 million and accounts payable were $375,000. Sales, which in 2012 were $2.5 million, are expected to increase by 25% in 2013. Total ass

  • Q : Problem on EBIT ABC Corporation stock

    ABC Corporation stock sells at $27 per share and its dividend per share is $1.20. ABC has price-earnings ratio of 16. The company contains $40 million worth of bonds, selling at par, with 8.5% coupon. The EBIT of ABC is of $12 million and its tax rate is 30%. Calculat

  • Q : How can optimal capital structure be

    How can optimal capital structure be calculated?

  • Q : Explain any indisputable model for

    Is there any indisputable model for valuing the brand of a company?

  • Q : Illustrates cost of its equity is zero

    Is this true that the cost of its equity is zero, if a company does not distribute dividends?

  • Q : Calculate the risk-free rate You have

    You have been given the following information on two corporations; you are to assume that thesecurities are correctly priced. My Corp, Inc. has a Beta of 1.25 and an Expected Return of .145;Your Corp, Inc. has a Beta of .75 and an Expected Return of .095. Based on the

  • Q : In which cases use different WACCs Is

    Is this possible to use different WACCs within order to discount each year’s flows? In which cases?