Question

Over a certain period, large-company stocks had an average return of 12.94 percent, the average risk-free rate was 2.65 percent, and small-company stocks averaged 17.73 percent. What was the risk premium on small-company stocks for this period

Answer 1

15.08 percent

Step-by-step explanation:

Calculation to determine What was the risk premium on small-company stocks for this period

Using this formula

Risk premium =Average risk-free rate -small-Company stocks averaged

Let plug in the formula

Risk premium=2.65 percent-17.73 percent

Risk premium=15.08 percent

Therefore the risk premium on small-company stocks for this period is 15.08 percent