Arizona State University FIN FIN 40628 RichardResourcesInc. (RRI) has an estimated beta of 1.Currently, the short-term treasury interest rate is 0.8% per year.Historically, returns to a…
the short-term treasury interest rate is 0.8% per year. Historically, returns to a broadly diversified portfolio of stock market investments have averaged 10.6% per year, and short term treasury interest rates have averaged 3.4% per year. Based on a survey of investment management professionals, the expected return to the broadly diversified market over the next several years is 6.8% per year.
(a) What estimate of the market risk premium is supported by the historical evidence?
A) 3.4
B) 3.8
C) 6.0
D) 7.2
E) 9.8
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