Please provide explanation We know that during the last 10 years, the average historical return on a market index is 12%.

Please provide explanation

We know that during the last 10 years, the average historical return on a market index is 12%. We also know that the average inflation rate and average risk-free rate over the last 10 years are 2% and 5%, respectively. What is the real risk premium using the exact Fisher equation?

Select one:

a. 2.94%

b. 6.86%

c. 7.00%

d. 9.80%

e. 10.00%