Rahat Amin
New member
- Jun 18, 2026
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From Equity Book, the following formulas can be cited:
(i) Required return on equity = Current expected risk-free return + Equity risk premium
(ii) Required return on share i=Current expected risk-free return +βi(Equity risk premium)
Now please tell me that the subtle difference in the above formulas. If (i) and (ii) is equal, then βi(Equity risk premium)= Equity risk premium
From my understanding goes:
Equity risk premium= βi (Market Return- Risk free Return) [(Market Return- Risk free Return)= Market Risk Premiun]
And the 2nd Formula should be written as:
Required return on share i=Current expected risk-free return +βi(Market risk premium)
Very Easy topic. But please Clarify.
(i) Required return on equity = Current expected risk-free return + Equity risk premium
(ii) Required return on share i=Current expected risk-free return +βi(Equity risk premium)
Now please tell me that the subtle difference in the above formulas. If (i) and (ii) is equal, then βi(Equity risk premium)= Equity risk premium
From my understanding goes:
Equity risk premium= βi (Market Return- Risk free Return) [(Market Return- Risk free Return)= Market Risk Premiun]
And the 2nd Formula should be written as:
Required return on share i=Current expected risk-free return +βi(Market risk premium)
Very Easy topic. But please Clarify.