Risk premium

Risk premium,

Definition of Risk premium:

  1. Acquisitions: Estimated portion of the purchase price of an asset or firm assumed as the market (systemic) risk inherent in the purchase.

  2. Investing: (1) Difference between a risk-free return (such as from government bonds) and the total return from a risky investment (such as equity stock). (2) Additional return or rate of interest (above the market interest rate) an investor requires for investing in a proposition or venture. Also called price of risk. See also price of time.

Meaning of Risk premium & Risk premium Definition