27 The market risk premium is computed by: Hint 1: Study the CAPM equation to determine what the market risk premium equals to: E(r) = rf+beta x [E(TM) - rf] Hint 2: you must memorize this equation for the exam. O adding the risk-free rate of return to the inflation rate.. O adding the risk-free rate of return to the market rate of return. O subtracting the risk-free rate of return from the inflation rate. subtracting the risk-free rate of return from the market rate of return. O multiplying the risk-free rate of return by a beta of 1.0