Problem:
Last year, Thomas invested $38,000 in Oil Town stock, $11,000 in long-term government bonds, and $8,000 in U.S. Treasury bills. Over the course of the year, he earned returns of 12.1 percent, 6.3 percent, and 3.9 percent, respectively.
Required:
Question: What was the nominal risk premium on Oil Town's stock for the year?
- 1.9 percent
- 4.7 percent
- 5.8 percent
- 7.6 percent
- 8.2 percent
Note: Explain in detail.