Question: During the period from 1926-2013 US Large & small capitalization stocks returned 12.1% and 16.9% per year. Over this same period, US Treasury Bills (a

  1. During the period from 1926-2013 US Large & small capitalization stocks returned 12.1% and 16.9% per year. Over this same period, US Treasury Bills (a risk-free investment) returned 3.5% per year.

  1. What is the risk premium of large and small company stocks during this period?

  1. What is the significance of the risk premiums of large and small company stocks?

  1. Given the risk premiums of both large and small company stocks over this long-term period, why would investors ever want to invest in US Treasury Bills?

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