Question
Consider the following table for a period of six years. Returns Year Large-Company Stocks U.S. Treasury Bills 1 -14.89% 7.33% 2 -26.53 8.01 3 37.27
Consider the following table for a period of six years.
Returns
Year | Large-Company Stocks | U.S. Treasury Bills |
1 | -14.89% | 7.33% |
2 | -26.53 | 8.01 |
3 | 37.27 | 5.91 |
4 | 23.97 | 5.27 |
5 | -7.24 | 5.47 |
6 | 6.61 | 7.70 |
Requirement 1: |
Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) |
Arithmetic average returns | |
Large-company stock | % |
T-bills | % |
Requirement 2: |
Calculate the standard deviation of the returns for large-company stocks and T-bills over this time period.(Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) |
Standard deviation | |
Large-company stock | % |
T-bills | % |
Requirement 3: | |
Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. | |
(a) | What was the arithmetic average risk premium over this period? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
Risk premium | % |
(b) | What was the standard deviation of the risk premium over this period? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
Risk premium standard deviation | % |
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