The equity market risk premium (Rm-Rf) represents the returns investors expect to compensate them for taking extra risk by investing in the stock market over and above the risk-free rate. In other words, it is the difference between the risk-free rate and the market rate. It is a highly contentious figure.
Jan 03 2013 01:02 PM
The frequently used number is based on the historical average return obtained from investing in the stock market. In this scenario, the stock market returns for the Brocade industry - networking and communications make sense to use.