Use the data in the tables below to answer the following questions: Average rate

Question

Use the data in the tables below to answer the following questions: Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2015. Portfolio Average Annual Rate of Return (%) Average Premium (Extra return versus Treasury bills) (%) Treasury bills 3.8 Treasury bonds 5.3 1.5 Common stocks 11.4 7.6 Standard deviation of returns, 1900–2015. Portfolio Standard Deviation (%) Treasury bills 2.9 Long-term government bonds 9.0 Common stocks 19.9 a. What was the average rate of return on large U.S. common stocks from 1900 to 2015? (Enter your answer as a percent rounded to 1 decimal place.) b. What was the average risk premium on common stocks? (Enter your answer as a percent rounded to 1 decimal place.) c. What was the standard deviation of returns on common stocks? (Enter your answer as a percent rounded to 1 decimal place.)

Explanation / Answer

From the given data

a. What was the average rate of return on large U.S. common stocks from 1900 to 2015? 11.4%

b. What was the average risk premium on common stocks? 7.6%

.c. What was the standard deviation of returns on common stocks? 19.9%

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