Over the past four years,the common stock of JL Steel Co.produced annual returns of 6.2,5.8,11.2,and 13.6 percent,respectively.Treasury bills produced returns of 3.4,3.3,4.1,and 4.7 percent,respectively over the same period.What is the standard deviation of the risk premium on JL Steel 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 2.8, 2.5, 7.1, and 8.9 percent, respectively.Mean = (.028 + .025 + .071 + .089)/4 = .0533Var = [(.028 - .0533)² + (.025 - .0533)² + (.071 - .0533)² + (.089 - .0533)²]/(4 - 1) = .001037Std Dev = √ (.001037) = 3.22 percent

Over the Past Four Years,the Common Stock of JL Steel