In: Finance
Suppose we have the following returns for large-company stocks and Treasury bills over a six-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.)
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 to 2 decimal places.)
c-1. Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the average 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.)
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.)