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Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%)T-Bill Return (%) 2011 0.03 2012 16.05...

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

6 comments
  • 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

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