Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose we have the following returns for large-company stocks and Treasury bills over a six-year period: Year Large Company US Treasury Bill 1 3.70% 4.78%
Suppose we have the following returns for large-company stocks and Treasury bills over a six-year period: |
Year | Large Company | US Treasury Bill |
1 | 3.70% | 4.78% |
2 | 14.36 | 3.61 |
3 | 19.35 | 4.20 |
4 | 14.33 | 5.92 |
5 | 31.82 | 5.40 |
6 | 37.06 | 5.41 |
a. | Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
b. | Calculate the standard deviation of the returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
c-1. | Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the 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.) |
a. Large company stocks?____%
T Bills? ____%
b. Large company stocks? ___%
T Bills?____%
c1. Average risk premium?___%
c2. SD?___%
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