The Average Annual Return on the S&P 500 Index from 1986

question 58

Multiple Choice

The average annual return on the S&P 500 Index from 1986 to 1995 was 17.6 percent. The average annual T-bill yield during the same period was 9.8 percent. What was the market risk premium during these 10 years?

• A) 8.2 percent
• B) 7.8 percent
• C) 8.8 percent
• D) 9.8 percent

---

Definitions:

Detachable Stock Warrants

Financial instruments that grant the holder the right to purchase company stock at a specified price and are separable from the bond or stock with which they were issued.

Additional Paid-In Capital

Additional paid-in capital refers to the amount of money investors have paid for shares in a company over and above the stated par value of the shares.

Expired Warrants

Warrants that have reached their expiration date and are no longer valid or exercisable to buy the underlying security at a predetermined price.

Additional Paid-In Capital

The amount of money paid by investors to a company above the par value of the shares during common or preferred stock issuance.