Compute approximate risk premium for common stocks


Assume that the consensus required rate of return on common stocks is 14 percent. In addition, you read in Fortune that the expected rate of inflation is 5 percent and the estimated long-term real growth rate is 3 percent. What interest rate would you expect on U.S. government T-bills? What is the approximate risk premium for common stocks implied by this data?

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Finance Basics: Compute approximate risk premium for common stocks
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