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Assume these are the stock market and Treasury bill returns for a 5-year period: Year 2013 2014 2015 2016 2017 Stock Market T-Bill Return Return (%) (%) 31
Assume these are the stock market and Treasury bill returns for a 5-year period: Year 2013 2014 2015 2016 2017 Stock Market T-Bill Return Return (%) (%) 31.7 0.02 10.9 0.02 -1.6 0.02 13.0 0.20 21.3 0.80 Required: a. What was the risk premium on common stock in each year? (Negative values should be entered with a negative sign.) 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.) Complete this question by entering your answers in the tabs below. Required A Required B Required C What was the risk premium on common stock in each year? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Risk Premium % Year 2013 2014 2015 2016 2017 % % %
Expert Solution
1.
=31.7%-0.02%=31.68%
2.
=10.9%-0.02%=10.88%
3.
=-1.6%-0.02%=-1.62%
4.
=13%-0.02%=12.98%
5.
=21.3%-0.8%=20.50%
6.
=(31.7%-0.02%+10.9%-0.02%-1.6%-0.02%+13%-0.02%+21.3%-0.8%)/5=14.884%
7.
=STDEV.P(31.7%-0.02%,10.9%-0.02%,-1.6%-0.02%,13%-0.02%,21.3%-0.8%)=11.0062193327228%
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