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Problem 11-6 Risk Premiums (LO1) Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%)

Problem 11-6 Risk Premiums (LO1) Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock Market Return (%) T-Bill Return (%) 2016 13.0 0.2 2017 21.0 0.8 2018 -6.2 1.8 2019 29.8 2.1 2020 20.6 0.4 W Required: 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? (Ignore that the estimation is from a sample of data.)

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