Question: Refer to Table 1.1 for large-stock and T-bill returns for the period 1973-1977: a. Calculate the observed risk premium in each year for the common

Refer to Table 1.1 for large-stock and T-bill returns for the period 1973-1977:
a. Calculate the observed risk premium in each year for the common stocks.
b. Calculate the average returns and the average risk premium over this period.
c. Calculate the standard deviation of returns and the standard deviation of the risk premium.
d. Is it possible that the observed risk premium can be negative? Explain how this can happen and what it means.

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Year Common stocks Tbill return Risk premium 1973 1469 729 2198 1974 2647 799 3446 1975 3723 587 313... View full answer

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