b. If you now use past returns to estimate the expected risk premium, will the inclusion of data for 2030 cause you to underestimate or overestimate the return that investors required in the past?

®

● ● ● ● ●

PROBLEM SETS Chapter 7 Introduction to Risk, Diversification, and Portfolio Selection 213 Probability Payoff Net Profit 0.10 $500 $400 0.50 100 0 0.40 0 –100

c. Will the inclusion of data for 2030 cause you to underestimate or overestimate the return that investors require in the future?