Assume these are the stock market and Treasury bill returns for a 5-year period: T-Bill Return Year Stock Market Return (%) (8) 2016 35.90 0.21 2017 15.20 0.21 2018 -5.10 0.21 2019 16.90 0.08 2020 25.90 0.10 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.) Complete this question by entering your answers in the tabs below. Required A Required B Required C What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Standard deviation %

Assume these are the stock market and Treasury bill returns for a 5-year period: T-Bill Return Year Stock Market Return (%) (8) 2016 35.90 0.21 2017 15.20 0.21 2018 -5.10 0.21 2019 16.90 0.08 2020 25.90 0.10 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.) Complete this question by entering your answers in the tabs below. Required A Required B Required C What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Standard deviation %

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section7.4: Valuing Common Stocks

Problem 3ST

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