Risk Premium the Annual Return on the S&P 500 Index

question 89

Multiple Choice

Risk Premium The annual return on the S&P 500 Index was 18.1 percent. The annual T-bill yield during the same period was 6.2 percent. What was the market risk premium during that year?

• A) 6.2%
• B) 11.9%
• C) 18.1%
• D) 24.3%

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Definitions:

Restrictive Covenants

Clauses in contracts that impose limitations or conditions on the actions of parties, commonly found in lending agreements to protect the lender.

Indenture

A formal legal agreement, contract, or document, especially one relating to a loan or bond issue.

Debenture

An unsecured bond.

Sinking Fund

A savings fund accumulated over time for the purpose of paying off debt or replacing a large expense in the future.