The average annual return on the s& p 500 index from 1986 to 1995 was16.20 percent. the average annual t-bill yield during the same period was 4.80 percent. what was the market risk premium during these ten years? average market risk premium %.

11.4%

Explanation:

Given that,

Average annual return on the S&P 500 Index from 1986 to 1995 = 16.20%

Average annual T-bill yield during the same period = 4.80%

Market risk premium is the difference between the expected return on the portfolio (market) and the risk free return.

Therefore,

Average market risk premium = Return on market - risk free return

                                                  = 0.1620 - 0.048

                                                  = 0.114 or 11.4%

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