12.1 Market Risk Premium You want to find the current market risk premium. Go to money.cnn.com, follow the "Bonds &; Rates" link, and the "Latest Rates" link. What is the shortest maturity interest rate shown? What is the interest rate for this maturity? Using the large-company stock return in Table 12.3, what is the current market risk premium? What assumption are you making when calculating the risk premium?

12.2 Historical Interest Rates Go the St. Louis Federal Reserve web site at www.stls.frb.org and follow the "FRED/Data" link and the "Interest Rates" link. You will find a list of links for different historical interest rates. Follow the "10-Year Treasury Constant Maturity Rate" link and you will find the monthly 10-year Treasury note interest rates. Calculate the average annual 10-year Treasury interest rate for 1999 and 2000. Compare this number to the long-term government bond returns and the U.S. Treasury bill returns found in Table 12.1. How does the 10-year Treasury interest rate compare to these numbers? Do you expect this relationship to always hold? Why or why not?

12.3. Market Efficiency What are the best performing stocks over the past year? Go to finance.yahoo.com and select the "Stock Screener" link. You will see a "Performance" category and a pull-down menu labeled "1 Yr Stock Perf." Select "Up more than 200%" and "Find Stocks." How many stocks have increased more than 200% over the past year? Now go back and select "Down more than 90%." How many stocks have dropped more than 90% in value over the past year? What does this say about market efficiency?