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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 3.88% 5.78%
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 | 3.88% | 5.78% |
2 | 14.31 | 2.45 |
3 | 19.05 | 3.68 |
4 | -14.63 | 7.12 |
5 | -32.12 | 4.92 |
6 | 37.29 | 4.89 |
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.) |
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