Risk Premium is the difference between the rate of return of an investment and the rate of return of an risk free asset over the same time period.

Formula: Risk Premium = Ra – Rf

Ra= Investment or Asset return

Rf= Risk free return

Risk Premium is the difference between the rate of return of an investment and the rate of return of an risk free asset over the same time period.

Formula: Risk Premium = Ra – Rf

Ra= Investment or Asset return

Rf= Risk free return