Suppose we have the following returns for large-company stocks and Treasury bills over a six year period:
Question:
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 | 3.91 | 5.87 |
2 | 14.35 | 2.51 |
3 | 19.29 | 3.74 |
4 | –14.39 | 7.15 |
5 | –31.88 | 5.34 |
6 | 37.00 | 5.39 |
a. | Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations. 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. |
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? |
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? |