OEPIN32000OL1Principles Chapter 10 11 HWxAmeren Econnect FI

OEPIN-32000-OL1-Principles Chapter 10 & 11 HWxAmeren: Econnect FINANCE 10&11 HW Question 6 (of 10) 10.00 points The average annual return on an Index from 1986 to 1995 was 16.70 percent. The average annual T-bill yield during the same period was 5.90 percent What was the market risk premium during these ten years? (Round your answer to 2 decimal places.) Average market risk premium ReferenceseBook&Resources; Worksheet oimculty 1 Basic

Solution

Average Risk Premium of the market = Average Market Return - Average Risk Free Rate ( or Average T-bill Rate) = 16.70% - 5.90% = 10.80%.

Hence average market risk premium is 10.80%.