Question

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

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

Year Stock Market Return (%) T-Bill Return (%)
2013 35.60 0.20
2014 15.10 0.20
2015 −5.00 0.20
2016 16.70 0.07
2017 25.50 0.09

Required:

a. 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.)

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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