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% & 13.68% is incorrect)
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% & 13.68% is incorrect)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
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% & 13.68% is incorrect)
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