Opportunity costs calculated for the return on equity in a company. – Often calculated using the formula cost of equity = risk-free interest rate plus risk premium on equity, where the risk-free interest rate is taken as the real interest rate plus the expected inflation rate, and the risk premium is often calculated using the equation: beta times expected market return minus risk-free interest rate. – In the ECB’s definition, the return investors demand for holding stocks. In the relevant calculations, this return is similar to the discount rate used to calculate the present value of expected future dividend payouts (equity premium). – See return on equity, real interest rate, interest rate risk. – Cf. ECB Monthly Bulletin, September 2005, pp. 43 f. (definitions, time series; compare euro area with U.S.A.).
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