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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 3.91

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 3.91 5.87
2 14.35 2.51
3 19.29 3.74
4 14.39 7.15
5 31.88 5.34
6 37.00 5.39

a.

Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

Average returns
Large company stocks %
T-bills %

b.

Calculate the standard deviation of the returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

Standard deviation
Large company stocks %
T-bills %

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? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Average risk premium %

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. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Standard deviation %

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