Final answer:
The stock market return is calculated by adding the risk-free rate of 2.66% to the risk premium of 7.14%, yielding a total return of 9.80%. The correct answer to the question is option d. 9.80%.
Step-by-step explanation:
If the risk premium on the stock market was 7.14 percent and the risk-free rate was 2.66 percent, we can calculate the stock market return by adding the risk-free rate to the risk premium. This is because the stock market return is the sum of the risk-free rate and the compensation investors demand for taking on the higher risk associated with the stock, which is the risk premium.
Thus, the calculation for the stock market return is:
Stock Market Return = Risk-Free Rate + Risk Premium
Stock Market Return = 2.66% + 7.14%
Stock Market Return = 9.80%
Therefore, the correct answer is option d. 9.80%.