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The total annual returns on large company common stocks averaged 11.8% from 1926 to 2009 small company stocks averaged 16.6%, long-term government bonds averaged 5.8%,

  1. The total annual returns on large company common stocks averaged 11.8% from 1926 to 2009 small company stocks averaged 16.6%, long-term government bonds averaged 5.8%, while Treasury Bills averaged 3.7%. What was the average risk premium earned by long-term government bonds and small company stocks, respectively?

    a.

    1.8%; 11.9%

    b.

    2.1%; 12.9%

    c.

    9.5%; 1.8%

    d.

    4.4%; 13.9%

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