Question
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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