The Historical Returns for the Past Three Years for Stock

Multiple Choice

The historical returns for the past three years for Stock B and the stock market portfolio are Stock B: 24 percent, 0 percent, 24 percent; market portfolio: 10 percent, 12 percent, 20 percent. If the risk-free rate is 4 percent, calculate the market risk premium.

A) 18.1 percent
B) 14.0 percent
C) 10.0 percent
D) 6.0 percent