Table calculates the risk premiums on stocks and bonds relative to T-bills by taking the difference in average nominal total returns on each asset class. Would these risk premiums be much different if we calculated them using real rather than nominal returns?
Answer to relevant QuestionsAre there diminishing returns to risk taking? Nano-Motors Corp. has stock outstanding which sells for $10 per share. Macro-Motors Inc. shares cost $50 each. Neither stock pays dividends at present. a. An investor buys 100 shares of Nano-Motors. A year later the stock ...The current yield to maturity on a one-year Treasury bill is 2 %. You believe that the expected risk premium on stocks vs. bills equals 7.7 %. a. Estimate the expected return on the stock market next year. b. Explain why the ...Use the following information to compare the recent performance of the S&P 500 Index, the Nasdaq Index, and the Treasury Bill Index from 1983-2003. Each of these index numbers is calculated in a way that assumes that ...The table below shows the difference in returns between stocks and Treasury bills and the difference between stocks and Treasury bonds at 10-year intervals. a. At the end of 1973, the yield on Treasury bonds was 6.6% and the ...
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