Question

If the risk premium on the stock market was 6.63 percent and the risk-free rate was 2.49 percent, what was the stock market return?


Multiple Choice

9.95%


9.12%


4.14%


6.63%


7.30%

Answer 1

To calculate the stock market return, you can use the formula:

\[
\text{Stock Market Return} = \text{Risk-Free Rate} + \text{Risk Premium}
\]

Given:
- Risk-Free Rate = 2.49%
- Risk Premium = 6.63%

Now, substituting the values:

\[
\text{Stock Market Return} = 2.49\% + 6.63\% = 9.12\%
\]

Therefore, the stock market return is **9.12%**.

The correct answer is: **9.12%**.