Equity Risk Premium vs Market Risk Premiun

[Rahat_Amin]

From Equity Book, the following formulas can be cited:

(i) Required return on equity = Current expected risk-free return + Equity risk premium

(ii) Required return on share i=Current expected risk-free return +βi(Equity risk premium)

Now please tell me that the subtle difference in the above formulas. If (i) and (ii) is equal, then βi(Equity risk premium)= Equity risk premium

From my understanding goes:

Equity risk premium= βi (Market Return- Risk free Return) [(Market Return- Risk free Return)= Market Risk Premiun]

And the 2nd Formula should be written as:

Required return on share i=Current expected risk-free return +βi(Market risk premium)

Very Easy topic. But please Clarify.

[S2000magician]

@Rahat_Amin

From Equity Book, the following formulas can be cited:

(i) Required return on equity = Current expected risk-free return + Equity risk premium

(ii) Required return on share i=Current expected risk-free return +βi(Equity risk premium _ Market risk premium _)

That’s how the second equation should read.

[Rahat_Amin]

Thank You.

[S2000magician]

You’re welcome.