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Calculate the equity risk premium

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If the rate of return on the S&P 500 index was 23% for 2009, and the risk-free rate at the end of 2009 was 1%, calculate the equity risk premium for 2009.

Recalculate the equity risk premium using 1981 data, when the risk free rate was 15% and the S&P 500 index return was MINUS 10%. 

What are the implications of different equity risk premia numbers for different time periods? HINT: When you use the CAPM you mus enter an equity risk premium. Therefore how do you do that accurately when data for different years produce different equity risk premia. 

Reference no: EM131210681

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