Fundamentals of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259722615
Author: Richard A Brealey, Stewart C Myers, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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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?
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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.)-- expressed in % (NOTE: 11.31% & 13.68% is incorrect)
Chapter 11 Solutions
Fundamentals of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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