Question

Year	Large – Company Stocks	US Treasury Bill
1	3.67%	4.69%
2	14.32	3.55
3	19.11	4.14
4	-14.57	5.89
5	-32.06	5.16
6	37.35	5.33

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.)

Large Company Stocks	4.64%
T-Bills	4.79%

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.)

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? (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.)

Average risk premium	_____ %
Standard deviation	_____ %

Answer 1