Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return T-Bill Return Year 1: Stock Market return 34.03 T-Bill return 4.40 Year 2: Stock Market return 32.10 T-Bill return .80 Year 3: Stock market return 14.16 T-Bill return .28 Year 4: Stock malret return 3.98 T-Bill return .05Year 5: stock market return 19.76 T-Bill return .07

a. What was the risk premium on common stock in each year?

Year Risk Premium Year 1: ___________% Year 2: ____________% Year 3: ____________% Year 4: ____________% Year 5: _____________%

b. What was the average risk premium? Average risk premium: _________%

c. What was the standard deviation of the risk premium? Standard deviation: __________%