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Determining the risk premium on common stock

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Reference no: EM132648544

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

Year Stock Market Return (%) T-Bill Return (%)

2013   32.80   0.09 

2014   12.20   0.09 

2015   -2.90   0.09 

2016   14.00   0.04 

2017   23.00   0.06 

Required:

a. What was the risk premium on common stock in each year?

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.)

Reference no: EM132648544

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