Risk Premium The annual return on the S&P 500 Index was 12.4 percent. The annual T-bill yield during the same period was 5.7 percent. What was the market risk premium during that year?
A) 5.7%
B) 6.7%
C) 12.4%
D) 18.1%

Question

Quizplus · Accepted Answer

The market risk premium is the difference between the return on the S&P 500 Index and the T-bill yield. Therefore, the market risk premium during that year is 12.4% - 5.7% = 6.7%.

Risk Premium the Annual Return on the S&P 500 Index