In a year in which common stocks offered an average return of 18%,Treasury bonds offered 10% and Treasury bills offered 7%,the risk premium for common stocks was:
A) 1%.
B) 3%.
C) 8%.
D) 11%.

Question

Quizplus · Accepted Answer

The risk premium for common stocks is calculated as the difference between the return on common stocks and the return on a risk-free investment, typically Treasury bills. Here, it is 18% - 7% = 11%.

In a Year in Which Common Stocks Offered an Average