Question
Consider the following rates of return: Year Large-Company Stocks US Treasury Bills 1 3.99 % 6.65 % 2 14.50 4.46 3 19.39 4.33 4 14.29
Consider the following rates of return:
Year Large-Company Stocks US Treasury Bills
1 3.99 % 6.65 %
2 14.50 4.46
3 19.39 4.33
4 14.29 7.34
5 31.78 5.44
6 37.10 6.45
a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Average returns
Large-company stocks _______%
T-bills _____________%
b. Calculate the standard deviation of the returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Standard deviation
Large-company stocks ______%
T-bills _________%
c-1. Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the arithmetic average risk premium over this period? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Average risk premium _____%
c-2. Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the standard deviation of the risk premium over this period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Standard deviation ______ %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started