Fundamentals Of Corporate Finance, 9th Edition
9th Edition
ISBN: 9781260052220
Author: Richard Brealey; Stewart Myers; Alan Marcus
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 11, Problem 6QP
Risk Premiums. Here are
- 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?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Assume these are the stock market and Treasury bill returns for a 5-year period:
Year
Stock Market Return (%)
T-Bill Return (%)
2016
13.0
0.2
2017
21.0
0.8
2018
-6.2
1.8
2019
29.8
2.1
2020
20.6
0.4
Required:
What was the risk premium on common stock in each year?
What was the average risk premium?
What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)-- expressed in % (NOTE: 11.31% is incorrect)
Assume these are the stock market and Treasury bill returns for a 5-year period:
Stock Market T-Bill Return
Return (%)
(%)
0.14
Year
2013
34.20
2014
13.90
0.14
2015
-3.80
0.14
2016
14.80
0.09
2017
24.30
0.11
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.)
Complete this question by entering your answers in the tabs below.
Required A
Required B
Required C
What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) (Do not round
intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Standard deviation
%
Assume these are the stock market and Treasury bill returns for a 5-year period:
Year
Stock Market Return (%)
T-Bill Return (%)
2016
13.0
0.2
2017
21.0
0.8
2018
-6.2
1.8
2019
29.8
2.1
2020
20.6
0.4
Required:
What was the risk premium on common stock in each year?
What was the average risk premium?
What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)
Chapter 11 Solutions
Fundamentals Of Corporate Finance, 9th Edition
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Assume these are the stock market and Treasury bill returns for a 5-year period: ITT Stock Market T-Bill Return Year Return (%) (%) 2013 33.70 0.13 2014 13.30 0.13 2015 -3.60 0.13 2016 14.70 0.08 2017 24.20 0.10 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.) Complete this question by entering your answers in the tabs below. Required A Required B Required C What was the risk premium on common stock in each year? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Year Risk Premium 2013 % 2014 % 2015 % 2016 2017 %arrow_forwardAssume these are the stock market and Treasury bill returns for a 5-year period: T-Bill Return Year Stock Market Return (8) (8) 2016 32.50 0.07 2017 11.80 0.07 2018 -2.40 0.07 2019 13.70 0.25 2020 22.40 0.27 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.) Complete this question by entering your answers in the tabs below. Required A Required B Required C What was the risk premium on common stock in each year? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Negative values should be entered with a negative sign.. Year Risk Premium 2016 % 2017 % 2018 % 2019 % 2020 %arrow_forwardAssume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%) T-Bill Return (%) 2013 36.00 0.22 2014 15.40 0.22 2015 −5.20 0.22 2016 17.00 0.09 2017 26.00 0.11 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.)arrow_forward
- Need help what was the risk premium on common stock each year 2013 2014 2015 2016 2017 what was the average risk premium? what was the standard deviation of the risk premium?arrow_forwardAssume these are the stock market and Treasury bill returns for a 5-year period: Stock Market T-Bill Year Return (%) 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 Required: a. What was the risk premium on common stock in each year? (Negative values should be entered with a negative sign.) 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.) es Complete this question by entering your answers in the tabs below. Required A Required B Required C What was the risk premium on common stock in each vear? (Do not round intermediate calculations. Enter vour answers as e to searcharrow_forwardAssume these are the stock market and Treasury bill returns for a 5-year period: Year 2016 2017 2018 2019 2020 Stock Market Return (%) 33.30 13.20 -3.50 14.50 23.80 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.) 3 Required A Required B T-Bill Return Complete this question by entering your answers in the tabs below. Standard deviation (%) 0.12 0.12 0.12 0.07 0.09 x Answer is complete but not entirely correct. Required C What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. 13.69 X % घarrow_forward
- Assume these are the stock market and Treasury bill returns for a 5-year period: Year 2013 Stock Market Return () 31.7 T-Bill Return () 0.02 0.02 2014 2015 2016 10.9 -1.6 13.0 21.3 0.02 0.20 0.80 2017 Required: a. What was the risk premium on common stock in each year? (Negative values should be entered with a negative sign.) 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.) Complete this question by entering your answers in the tabs below. Required A Required B Required C What was the average risk premium? (Do not round intermediate calculations. Enter vour answer as a percent rounded to 2 a o searcharrow_forwardAssume these are the stock market and Treasury bill returns for a 5-year period: Stock Market T-Bill Return (%) 0.02 0.02 0.02 0. 20 Return (%) Year 2013 2014 2015 2016 2017 31.7 10.9 -1.6 13.0 21.3 0.80 Required: a. What was the risk premium on common stock in each year? (Negative values should be entered with a negative sign.) 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.)arrow_forwardRisk 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-arrow_forward
- Stocks A and B have the following historical returns: Year Stock A’s Returns Stock B’s Returns 2015 (24.25%) 5.50% 2016 18.50 26.73 2017 38.67 48.25 2018 14.33 (4.50) 2019 39.13 43.86 Assume the risk-free rate during this time was 3.5%. What are the Sharpe ratios for Stocks A and B and the portfolio over this time period using their average returns? Answers: a) Sharpe ratio for Stock A = b) Sharpe ratio for Stock B = c) Sharpe ratio for Portfolio AB =arrow_forwardAssume these are the stock market and Treasury bill returns for a 5-year period: 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.)arrow_forwardIntro You've collected the following historical rates of return for stocks A and B: Year (t) FA,t FB,t 2016 0.02 0.01 2015 0.08 0.05 2014 0.17 0.07arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Business/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage
Business/Professional Ethics Directors/Executives...
Accounting
ISBN:9781337485913
Author:BROOKS
Publisher:Cengage
Portfolio return, variance, standard deviation; Author: MyFinanceTeacher;https://www.youtube.com/watch?v=RWT0kx36vZE;License: Standard YouTube License, CC-BY