Question

Hello,

I am doing a project of Apple, and need your help on following;

I need to find out a Risk-free rate, Risk Premium for stock and beta to calculate Required return on the stock of apple.

I know how to get a beta, but I do not know how to get a Risk-free rate and Risk Premium for stock. From my research, I could get a risk-free rate, which is 10-year treasury bonds, which is 2.79%.

Can you please verify my risk-free rate and show how to get a Risk Premium for stock?

Thanks

Answer 1

The risk free rate is the 10 year Treasury bond yield which is 2.79% that you have found correctly.

The risk premium is the difference between the market return and risk free return

Risk premium = Rm - Rf

where Rm = Market return = Historical return of Dow Jones industrial average in 10 years which is about 10%

Rm = 10% and Rf = 2.79%

So, Risk premium = 10%-2.79% = 7.21%