Refer to Table 10.1 in the text and look at the period from 1973 through 1978.

a. Calculate the arithmetic average returns for common stocks and T-bills over this period.

b. Calculate the standard deviation of the returns for common stocks and T-bills over this period.

c. Calculate the observed risk premium in each year for the common stocks versus the T-bills. What was the arithmetic average risk premium over this period?

What was the standard deviation of the risk premium over this period?

Table 10.1

Transcribed Image Text:

500 50 15 18 00 68 99 62 51 35 51 49 54 15 85 77 75 58 33 61 26 50 28 12 58 87 72 97 65 50 52 52 9 5 3 0 2528005253 5 2 9 3 0 81384602056 3ii-53-41 3-2, 1-21--1 1-1-24 ap et on 08 74 89 01 00 23 13 87 94 92 07 16 03 58 16 05 05 48 86 39 84 i 97 53 02 64 04 0 83 b 0. 5 1 7 5 5 2087152 9 5 4 6 0 1 0 226481483942 ar 1 ill 40 45 5 7 5 5 62 2 63 76 27 39 r. 86 58 73 79 89 22 83 89 86 43 78 68 05 10 64 90 01 o o o o i i i 2 3 2 4 3 2 3 3 3 3 4 4 6 6 6 3 3 4 7 7 9 7 71 12 23 51 25 0 2 39 27 12 20 3 4 1 32 7 5 25 6 7 8 22 038 27 0 25 8 10 29 44 can 38 00 00 47 29 27 42 45 91 79 31 16 4 36 30 52 87 45 44 69 3 1 2 1 1 2 3. 4 ca 40 62 59 94 93 80 45 07 3 63 4 22 33-4 71 90 50 35 17 23 51 26 28 66 97 90 29 29 70 90 70 10 70 83 38 60 80 10 50 52 55 42 5 4 4 2 3 2 5 5 10 27 18 13 52 93 28 6 7 20-40-0. 13 20 1 51 57 84 07 87 82 96 21 74 06 05 42 40 48 68 62 8 7 4 67 50 70 30 30 80 70 50 20 26 35-522 12 39 16-07 27 3 30 8 1 7 33 23 39 3 4 5-6 22 5 3 3 5 0 2 9 8434 18 09 82 6 9 68 2 7 3 7 32 3 5 09 9 3 8 6 85 9 70 70 70 20 46。70 70 3 0 225 2. 2 5 9 6 6 7 1 1 5 4 5 1 2 7 6 4 8 2528867643252736 2. 9 5 9 1 9 9 8 8 1 3 9 6 5 4 7 5 3 4 4 5 4 2 2 2 2 44300111 13 25 54 49 39 07 95 88 08 37 80 02 43 55 53 35 98 58 59 41 60 40 70 50 29 30 80 00 35 27 30 0 5 35 2 25 8 5 1 2 4 2 i 32 0 1 28 4 3 7 2 2 26 14 23 79 33 34 17-872 57 .3 1 9 1 0 7 1 7 27170 2. 9 4 3 4 4 4 3 5 5 2 1 0 1 2 0 1 2 3 0 4 1 2 2 1 2 1 1 2