Calculate the risk premium on equities versus bonds

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Reference no: EM131329100

The following data shows the rate of return on stocks and bonds for several recent years. Calculate the risk premium on equities vs. bonds each year and then calculate the average risk premium. Do you think, at the beginning of 2002, investors expected the outcomes we observe in this table?

Year	2002	2003	2004	2005
Return on stocks (%)	-20.9	31.6	12.5	6.4
Return on bonds (%)	17.8	1.4	8.5	7.8
Risk premium (%)

Reference no: EM131329100

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