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Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return...

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Finance

Assume these are the stock market and Treasury bill returns fora 5-year period:

YearStock Market Return (%)T-Bill Return (%)
2011?36.532.10
201229.100.60
201316.460.16
20141.580.08
201516.860.10

a. What was the risk premium on common stock ineach year? (Do not round intermediate calculations. Enteryour answers as a percent rounded to 2 decimalplaces.)

b. What was the average risk premium?(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places.)

c. What was the standard deviation of the riskpremium? (Do not round intermediate calculations. Enteryour answer as a percent rounded to 2 decimal places.)

Answer & Explanation Solved by verified expert
4.3 Ratings (726 Votes)
a Risk Premium is calculated using the formula Ri RfTBill return for each year will be the Riskfree Rate for thatyearRisk Premium for 2011 3653210 3863Risk Premium for 2012 29106 2850Risk Premium for 2013    See Answer
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Transcribed Image Text

Assume these are the stock market and Treasury bill returns fora 5-year period:YearStock Market Return (%)T-Bill Return (%)2011?36.532.10201229.100.60201316.460.1620141.580.08201516.860.10a. What was the risk premium on common stock ineach year? (Do not round intermediate calculations. Enteryour answers as a percent rounded to 2 decimalplaces.)b. What was the average risk premium?(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places.)c. What was the standard deviation of the riskpremium? (Do not round intermediate calculations. Enteryour answer as a percent rounded to 2 decimal places.)

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