Data from the last eight decades for S & P 500 index yield the following statistics: average excess return = 7.9%; Standard Deviation = 23.2%.

To the extent that these averages approximated investor expectations for the period, what must have been the average coefficient of risk aversion? Formula: E (r_m) r_f = ²_m

If the coefficient of risk aversion were actually 3.5, what risk premium would have been consistent with the markets historical standard deviation?