If the average annual rate of return for common stocks is 11.7 percent, and 4.0 percent for U.S. Treasury bills, what is the average market risk premium?
A)15.7 percent
B)4.0 percent
C)7.7 percent
D)Not enough information is provided.

Question

Quizplus · Accepted Answer

The market risk premium is the difference between the average annual rate of return for common stocks (11.7%) and the rate of return for U.S. Treasury bills (4.0%), which is 7.7% (11.7% - 4.0%). Therefore, the correct choice is C.

If the Average Annual Rate of Return for Common Stocks