Risk Premium is the rate of return added to a risk-free rate to reflect risk. The Risk-Free Rate represents the return investors get by investing in riskless instruments such as Treasury Bills. The Risk-Free Rate normally serves as the benchmark to guide investors on the minimum investment expectations when they invest in risky opportunities such as stocks listed on stock exchanges or privately owned businesses. For investors to invest in risky instruments such as corporate bonds, they require returns in terms of risk premiums above the risk-free rates. To invest in stocks listed on stock exchanges or in privately held businesses, investors require equity risk premiums (returns) which are high enough to compensate for such risky investments. In business valuation analysis, the equity risk premium is an important component in computing the Weighted Average Cost of Capital (WACC) which is the discount rate business valuators apply to convert future cash flows to the present value and the fair market value of a business entity.