Calculate the risk premium of your investments. Enter the returns of both your risk-free asset and your investment return.

Risk Premium Formula

The following formula is used to calculate a risk premium.

RP = RF-RA
  • Where Ra is the return on a risk-free asset
  • RF is the return on actual investment

To calculate the risk premium, subtract the risk-free return from the actual return.

Risk Premium Definition

A risk premium is the difference in returns between a risk-free asset and another asset class or individual asset.

How to calculate Risk Premium?

How to calculate risk premium?

  1. First, determine the return of your asset class.

    Measure the percentage return of the asset being analyzed.

  2. Next, determine the return of a risk free asset.

    For example a savings account that yields 1% is the

  3. Finally calculate the risk premium.

    Using the formula and returns determined in steps 1 and 2, calculate the risk premium.

FAQ

What is risk premium?

A risk premium is the difference in returns between a risk free asset and another asset class or individual asset.