Question
Consider the following table for a period of six years: Returns Year Large-Company Stocks U.S. Treasury Bills 1 15.19 % 7.39 % 2 26.62 8.04
Consider the following table for a period of six years:
Returns | |||||||
Year | Large-Company Stocks | U.S. Treasury Bills | |||||
1 | 15.19 | % | 7.39 | % | |||
2 | 26.62 | 8.04 | |||||
3 | 37.33 | 5.97 | |||||
4 | 24.03 | 5.57 | |||||
5 | 7.36 | 5.50 | |||||
6 | 6.67 | 7.79 | |||||
Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Arithmetic average returns | |
Large-company stock | % |
T-bills | % |
Calculate the standard deviation of the returns for large-company stocks and T-bills over this time 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 stock | % |
T-bills | % |
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? (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 % b. 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.) Risk premium 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