Small company stocks are yielding 15.7% while the U.S. Treasury bill has a 4.3% yield and a bank savings account is yielding 3.8%. What is the risk premium on small company stocks?
A) 7.6%
B) 11.4%
C) 11.9%
D) 15.7%

Question

Quizplus · Accepted Answer

The risk premium is the difference between the yield on small company stocks and the risk-free rate. So, the risk premium on small company stocks is 15.7% - 4.3% = 11.4%. Choice B is the correct answer.

Small Company Stocks Are Yielding 15