Assume these are the stock market and Treasury bill returns for a 5-year period: T-Bill Return Year Stock Market Return (%) (%) 2016 34.90 0.18 2017 14.70 0.18 2018 -4.60 0.18 2019 16.00 0.05 2020 25.00 0.07 Required: a. What was the risk premium on common stock in each year? b. What was the average risk premium? c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)
Assume these are the stock market and Treasury bill returns for a 5-year period: T-Bill Return Year Stock Market Return (%) (%) 2016 34.90 0.18 2017 14.70 0.18 2018 -4.60 0.18 2019 16.00 0.05 2020 25.00 0.07 Required: a. What was the risk premium on common stock in each year? b. What was the average risk premium? c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)
Chapter2: The Domestic And International Financial Marketplace
Section: Chapter Questions
Problem 1P
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