Here are the average rates of return for common stocks and


a. Here are the average rates of return for common stocks and Treasury billis for four different periods. What was the risk premium on stock for each of these periods?

1900-1924  1925-1949     1950-1974   1975-2010

Stocks 9.50%    10.20%             11.10%         13.70%

Treasury bills 5.10%     1.10%                3.50%           5.60%

b. What securities do the historical records show bond performances are typically against?

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