Historical Returns: Expected and Required Rates of Return
You have observed the following returns over time:
Year | Stock X | Stock Y | Market |
2012 | 16% | 15% | 12% |
2013 | 21 | 6 | 11 |
2014 | -16 | -6 | -11 |
2015 | 3 | 3 | 1 |
2016 | 22 | 12 | 13 |
Assume that the risk-free rate is 4% and the market risk premium is 7%. Do not round intermediate calculations.
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