1. Over a certain period, large-company stocks had an average return of 13.09 percent, the average risk-free rate was 2.68 percent, and small-company stocks averaged 17.85 percent. What was the risk premium on small-company stocks for this period?
2. Stock Valuation [LO1] Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.