Future Business Journal

Table 4 Comparison of risk premium and returns for two stocks A&B trading in BSE Sensex and S&P 500 indices

From: Role of debt-to-equity ratio in project investment valuation, assessing risk and return in capital markets

	Stock A	Stock B
Index: S&P 500
Covariance	3.7	86.21
Variance	3.66	97.412
Beta	1.01	0.885
Risk premium^±	3.42%	5.42%
Risk free rate	6.62%	7.34%
Return	9.95%	12.14%
Index: BSE Sensex
Covariance	24.25	261.58
Variance	23.31	244.46
Beta	1.04	1.07
Risk premium^±	20.32%	25.32%
Risk free rate	5.01%	6%
Return	26.33%	33.32%

± represents only the equity risk premium and does not include the country risk premium (e.g., reinvestment risk and default or credit risk)

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