Over the last fifty years in Italy, the average annual return on small stocks, large stocks and corporate bonds have been 12.50%, 9.25% and 8.50% respectively. The short-term government securities in this period have provided a return of 2.75%. If the inflation rate has been 2.25% over the last fifty years, the real risk premium on Italian large stocks is a.4.25% b.4.96% c. 3.98% d.5.50% e.4.16%

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The real risk premium on Italian large stocks can be calculated by subtr... View the full answer