Answer:
Year _______Risk Premium (%)
2011 _______ 0.95
2012_______ 16.01
2013_______ 32.99
2014_______ 12.66
2015_______ 0.46
Explanation:
The Risk premium is the premium paid to an investor for investing in a risky stock/security/asset over the risk-free rate in the market.
A Risk-free rate is a rate that is offered by a security having minimum or no risk at all e.g. Rate on Government securities are considered as the risk-free rate because these securities are backed by the government.
T bills or Treasury bills are also considered as risk-free investments.
Use following formula to calculate the Risk premium
Ris premium = Stock Market Return - T-Bill Return
Use above formula Calculate the risk premium as below
Year _ Stock Market Return (%) __T-Bill Return (%)__ Risk Premium (%)
2011 _______ 0.98 _______________0.03 _________ 0.95
2012_______ 16.06_______________0.05 _________ 16.01
2013_______ 33.06_______________0.07 _________ 32.99
2014_______ 12.71 _______________ 0.05 _________ 12.66
2015_______ 0.67 _______________ 0.21 __________ 0.46
