The market has an expected rate of return of 11.4%. The long-term government bond is expected to yield 5.4% and the U.S. Treasury bill is expected to yield 4.6%. The inﬂation rate is 3.9%. What is the
Market risk premium?
A) 6.0%
B) 6.8%
C) 7.5%
D) 8.5%
E) 9.3%

Question

Quizplus · Accepted Answer

Market risk premium = expected rate of return - risk-free rate
= 11.4% - 4.6% (U.S. Treasury bill rate)
= 6.8%

The Market Has an Expected Rate of Return of 11