Question
Consider the following table for a period of six years. Returns Year Large-Company Stocks U.S. Treasury Bills Year 1 15.69 % 7.49 % Year 2
Consider the following table for a period of six years. |
| Returns | ||||||
Year | Large-Company Stocks | U.S. Treasury Bills | |||||
Year 1 |
| 15.69 | % |
| 7.49 | % | |
Year 2 |
| 26.77 |
|
| 8.09 |
| |
Year 3 |
|
| 37.43 |
|
| 6.07 |
|
Year 4 |
|
| 24.13 |
|
| 6.07 |
|
Year 5 |
| 7.56 |
|
| 5.55 |
| |
Year 6 |
|
| 6.77 |
|
| 7.94 |
|
|
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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