-The historical data for the past three years for the market portfolio are 10%, 10% and
16%) If the risk-free rate of return is 4%, what is the market risk premium?

Question

Quizplus · Accepted Answer

Market risk premium = expected market return - risk-free rate
Expected market return = average of historical data for past three years = (10%+10%+16%)/3 = 12%
Market risk premium = 12% - 4% = 8%

-The Historical Data for the Past Three Years for the Market