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The following table summarizes risk premiums for stocks in the United States, relative to treasury bills and bonds, for different time periods: Risk Premium for
The following table summarizes risk premiums for stocks in the United States, relative to treasury bills and bonds, for different time periods: Risk Premium for Equity Stocks - T.Bills Arithmetic 7.55% 1928-2011 Stocks - T.Bonds Geometric Arithmetic Geometric 5.79% 5.62% 4.10% 3.36% 4.02% 2.35% -1.92% 1.08% -3.61% 1962-2011 5.38% 2002-2011 3.12% A. What risk premium do you use? (1 points) Why? B. Why is the geometric mean lower than the arithmetic mean for both bonds and bills? C. If you had to use a risk premium with the longer periods, what biases will the investor have
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