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Consider the following table for a period of six years. Returns Year Large-Company Stocks U.S. Treasury Bills Year 1 15.09 % 7.37 % Year 2

Consider the following table for a period of six years. Returns Year Large-Company Stocks U.S. Treasury Bills Year 1 15.09 % 7.37 % Year 2 26.59 8.03 Year 3 37.31 5.95 Year 4 24.01 5.47 Year 5 7.32 5.49 Year 6 6.65 7.76 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 9.50 % 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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