Question

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

Year		Stock Market Return				T-Bill Return
Year 1		?	33.03			5.00
Year 2			32.60			1.30
Year 3			13.66			.31
Year 4			4.88			.08
Year 5			20.66			.10

a.	What was the risk premium on common stock in each year? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Year	Risk premium
Year 1	%
Year 2	%
Year 3	%
Year 4	%
Year 5	%

b.	What was the average risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Average risk premium

%

c.	What was the standard deviation of the risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Standard deviation

%

Answer 1