A B C D E F G H 1 Chapter 5 -- Financial Risk and Required Return Z 3 PROBLEM 4 4 The realized returns for the market and Johnson Drugs for the last four years are given below: 5 6 Year Market Johnson 7 1 10% 5% 8 2 15% 0% a 3 -5% 14% 10 t 0% 10% 11 12 An average stock has a required return of 12 percent, and the market risk premium is 4 percent. 13 If Johnson's expected rate of return is 8 percent, what is the difference between Johnson's 14 |expected and required rates of return? 15 16 17 18 19 on