# Risk Premiums

Risk Premiums. Here are stock market and Treasury bill returns between 1997 and 2001:

Year: 1997 Stock Market Return= 31.29 T-Bill Return = 5.26

Year: 1998 Stock Market Return = 23.43 T-Bill Return = 4.86

Year: 1999 Stock Market Return = 23.56 T-Bill Return = 4.68

Year: 2000 Stock Market Return = -10.89 T-Bill Return = 5.89

Year: 2001 Stock Market Return = -10.97 T-Bill Return = 3.83

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?

https://brainmass.com/economics/risk-analysis/risk-premiums-stock-market-121206

#### Solution Preview

a) Risk premium = stock market return - risk free rate(T Bill)

1997: 31.29-5.26=26.03

1998: 23.42-4.86=18.56 ...

#### Solution Summary

The standard deviation of the risk premium is mentioned.

$2.19