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Name three uses for the risk premiums derived from the CAPM:

Name three uses for the risk premiums derived from the CAPM:

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Answer #1

Risk premium is the difference between the expected return on a market portfolio and the risk free rate.

Risk premium helps to measure the extra returns expected by market participants for the increased risk.Risk premium is used to calculate how much a investor needs to be compensated for taking the extra risk when compared to a lower risk free investment.The market risk premium helps investor to Calculate acceptable rate of return for an investment.

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