The risk premium of a stock of Yakir Development given its beta, risk free rate of return and market rate of return is 6.5%.
A stock is used to raise capital by public companies. Stocks gives its holders an ownership right in the company.
The risk premium is the rate of interest in excess of the risk free rate that investors demand for holding a risky stock.
Risk premium = market rate of return - risk free rate
8 - 1.5 = 6.5%
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