Question: The historical returns data for the past three years for Stock B and the stock market portfolio are: Stock B: 24%, 0%, 24%, Market Portfolios:

The historical returns data for the past three years for Stock B and the stock market portfolio are: Stock B: 24%, 0%, 24%, Market Portfolios: 10%, 12%, 20%. If the risk-free rate is 4%, calculate the market risk premium.

r_m = (10% + 12% + 20%)/3 = 8%

Market Risk Premium = 14% - 4% = 10%

I don't understand where 14 comes from. Can you help me with this. Thank you.

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