First, calculate the expected utility of the risky investment by weighting each possible outcome by its probability and then calculating the overall expected utility. Secondly, determine the certainty equivalent—the guaranteed return an individual is willing to accept as opposed to taking the risky asset. Finally, calculate the risk premium as follows: Risk Premium = Expected Utility of Risky Bet - Utility of Certainty Equivalent. In other words, it is equal to how much additional expected utility an individual requires to take on a risky bet instead of receiving a guaranteed payment (the certainty equivalent).