Risk Premiums. Here are rates of return on a broad stock market index between 2013 and 2017: (LO11-1) 6. Stock Market Return (%) T-Bill Return (%) Year 0.02% 2013 31.7% 0.02 2014 10.9 0.02 2015 -1.6 0.20 13.0 2016 0.80 21.3 2017

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter2: The Domestic And International Financial Marketplace
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Risk Premiums. Here are rates of return on a broad stock market index and on Treasury bills
between 2013 and 2017: (LO11-1)
6.
Year
Stock Market Return (%)
T-Bill Return (%)
2013
31.7%
0.02%
2014
10.9
0.02
2015
-1.6
0.02
2016
13.0
0.20
2017
21.3
0.80
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?
ear, it pays a divi-
Transcribed Image Text:Risk Premiums. Here are rates of return on a broad stock market index and on Treasury bills between 2013 and 2017: (LO11-1) 6. Year Stock Market Return (%) T-Bill Return (%) 2013 31.7% 0.02% 2014 10.9 0.02 2015 -1.6 0.02 2016 13.0 0.20 2017 21.3 0.80 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? ear, it pays a divi-
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