If an all-equity firm's beta is 2, the risk-free rate is 3 and the historical market risk premium is 17%.
The term "historical market risk premium" describes the discrepancy between an investor's expected return on an equity portfolio and the return at which there is no risk. Theoretically, the rate of return on an investment with no risk is represented by the term "risk-free rate of return."
The historical market risk premium is 17% (Re= 3% + 2 x 7%) if the beta of an all-equity firm is 2, the risk-free rate is 3, and the risk-free rate is 2.
By deducting the risk-free rate from the anticipated equity market return, the market risk premium can be calculated, giving market participants a way to quantify the additional return they expect in exchange for the higher risk.
Learn more about historical market risk premium: https://brainly.com/question/28166175
#SPJ4
