Over the past four years,the common stock of Jess Electronics Co.produced annual returns of 7.2,5.8,11.2,and 13.6 percent,respectively.Treasury bills produced returns of 3.4,3.3,4.1,and 4.0 percent,respectively over the same period.What is the standard deviation of the risk premium on Jess Electronics Co.stock for this time period?
A) 2.23 percent
B) 2.86 percent
C) 3.22 percent
D) 4.46 percent
E) 4.61 percent

Question

Quizplus · Accepted Answer

Annual risk premiums are 3.8, 2.5, 7.1, and 9.6 percent, respectively. Mean = (0.038 + 0.025 + 0.071 + 0.096) / 4 = 0.0575 Var = [(0.038 - 0.0575)² + (0.025 - 0.0575)² + (0.071 - 0.0575)² + (0.096 - 0.0575)²] / (4 - 1) = 0.001034 Std Dev = √ (0.001034) = 3.22 percent

Over the Past Four Years,the Common Stock of Jess Electronics