DATE (year/month)	Amazon	T-BILL rate	Market Return
201001	-0.067722	0	-0.0336
201002	-0.055897	0	0.034
201003	0.146706	0.0001	0.0632
201004	0.009796	0.0001	0.0201
201005	-0.084902	0.0001	-0.0788
201006	-0.129125	0.0001	-0.0556
201007	0.078986	0.0001	0.0694
201008	0.058868	0.0001	-0.0476
201009	0.258191	0.0001	0.0955
201010	0.052018	0.0001	0.0389
201011	0.061551	0.0001	0.0061
201012	0.026226	0.0001	0.0683
201101	-0.057556	0.0001	0.02
201102	0.021516	0.0001	0.035
201103	0.039471	0.0001	0.0047
201104	0.087048	0	0.029
201105	0.004494	0	-0.0127
201106	0.039656	0	-0.0175
201107	0.088171	0	-0.0235
201108	-0.032761	0.0001	-0.0598
201109	0.004646	0	-0.0759
201110	-0.012579	0	0.1135
201111	-0.099386	0	-0.0028
201112	-0.099797	0	0.0074
201201	0.123281	0	0.0505
201202	-0.075859	0	0.0442
201203	0.126996	0	0.0311
201204	0.145129	0	-0.0085
201205	-0.081889	0.0001	-0.0618
201206	0.072519	0	0.0389
201207	0.021677	0	0.0079
201208	0.064166	0.0001	0.0256
201209	0.024369	0.0001	0.0274
201210	-0.084252	0.0001	-0.0175
201211	0.082256	0.0001	0.0079
201212	-0.004682	0.0001	0.0119

The file Homework2Data.xls contains monthly returns for Amazon stock, the equity market, and one-month T-bills (risk free rate) from January 2010 to December. 2012

a. (2 points) Estimate the average monthly equity premium.

b. (8 points) Calculate monthly Sharpe ratio for Amazon (use the mean risk-free rate to compute the Sharpe ratio), then report the annualized mean and standard deviation of Amazon return. The returns are monthly, please annualize your answers by multiplying the means by 12 and the standard deviations by the square root of 12.

c. (6 points) Assume that monthly returns of Amazon are normally distributed. What is the 5% and 1% VaR?