Assume these are the stock market and Treasury bill returns for a 5-year period:   Year   Stock Market Return (%) T-Bill Return (%) 2013     33.20     0.11   2014     12.70     0.11   2015     −3.20     0.11   2016     14.40     0.06   2017     23.50     0.08       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.)

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

 

Year   Stock Market Return (%) T-Bill Return (%)
2013     33.20     0.11  
2014     12.70     0.11  
2015     −3.20     0.11  
2016     14.40     0.06  
2017     23.50     0.08  
 

 

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.)

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