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

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

2011 0.98 0.03

2012 16.06 0.05

2013 33.06 0.07

2014 12.71 0.05

2015 0.67 0.21

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

Year Risk Premium

2011 ____ %

2012 ___ %

2013 ___%

2014 ____%

2015 ____ %

#### Top Answer

2011 = 0.95% 2012: =... View the full answer

- c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.)
- acv1214
- May 03, 2018 at 10:42pm

- standard deviation of risk premium = 13.3275% (Use excel formula stdev(.95,16.01,32.99,12.66,0.46)
- aditiagarwala18
- May 03, 2018 at 10:44pm

- the answer is not correct....
- acv1214
- May 04, 2018 at 11:29am

- which one ? are you referring to standard deviation ? worth rounding off to 2 decimal places - 13.33%
- aditiagarwala18
- May 04, 2018 at 11:39am

- yes the standard dev I rounded it off to 13.33 but its saying its incorrect...
- acv1214
- May 04, 2018 at 11:44am

- that is strange because the risk premiums are correct - so standard deviation is fairly straight forward - The last try would be 0.13 (if it requires the standard deviation in decimal form and not percentage form)
- aditiagarwala18
- May 04, 2018 at 11:47am