Consider the following table for a period of six years. Returns Year Large-Company Stocks U.S. Treasury...

Consider the following table for a period of six years.

	Returns
Year	Large-Company Stocks				U.S. Treasury Bills
Year 1		–	15.39	%	7.43	%
Year 2		–	26.68		8.06
Year 3			37.37		6.01
Year 4			24.07		5.77
Year 5		–	7.44		5.52
Year 6			6.71		7.85

Requirement 1:

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

	Arithmetic average returns
Large-company stock	%
T-bills	%

Requirement 2:

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

	Standard deviation
Large-company stock	%
T-bills	%

Requirement 3:
Calculate the observed risk premium in each year for the large-company stocks versus the T-bills.

(a)	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 percentage rounded to 2 decimal places (e.g., 32.16).)

Risk premium

(b)

What was the standard deviation of the risk premium over this period? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Risk premium standard deviation

Solutions

Expert Solution

jeff jeffy answered 9 months ago

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