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Problem 10-8 Risk Premiums 1 Consider the following rates of return: 1 points US Treasury Bill 8 02:07:00 Large- Year Company Stocks 3.96% 2 14.12

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Problem 10-8 Risk Premiums 1 Consider the following rates of return: 1 points US Treasury Bill 8 02:07:00 Large- Year Company Stocks 3.96% 2 14.12 3 19.01 4 -14.67 5 -32.16 6 37.26 O 07 WN - 4.50% 4.88 3.80 6.96 4.88 6.14 eBook References C-1 Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. 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.) C-2 Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. 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.) C-1. % Average risk premium Standard deviation C-2 %

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