For the period 1926-2018, small-company stocks had an average return of 16.2 percent, U.S. Treasury bills returned 3.4 percent. What was the risk premium on small-company stocks during this period? Ο 10.0% Ο 19.6% Ο 13.0% 12.8% 13.2%
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In this case, the risky asset is small-company stocks, and the risk-free rate is the return on U.S. Treasury bills. Risk premium = Return on small-company stocks - Return on U.S. Treasury bills Risk premium = 16.2% - 3.4% Risk premium = 12.8% Show more…
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