### CFA Practice Question

Given that the risk premium on the market is 14%, and the beta on an asset is 0, what would be the risk premium on the asset?
A. 0%
B. 2%
C. Not enough information
Explanation: In order to obtain an asset's risk premium, one should multiply the market risk premium by the asset's beta. In this example, this would yield 14% x 0 = 0. The beta of 0 on the asset signifies that it has no systematic risk (which is the only measure of risk that is relevant, according to the capital market theorem). A riskless asset will not have a risk premium.

### User Contributed Comments4

User Comment
ontrack tricky. i thought we cant get the rate as we dont know the risk free rate.
takor when beta is 0, the SML intercepts the E(Ri) axis at the RFR, at which point E(Ri)=RFR; risk premium=E(Ri)-RFR=0
uviolet ontrack, the question asks for risk premium which is beta * market risk premium.
GBolt93 yeah, ontrack to be clear we don't need the rfr as we're given market premium, not market return. If beta was 0.5 the risk premium on the asset would be 14x.5=7%
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