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	3.92	5.90
2	14.18	2.53
3	19.37	3.76
4	14.31	7.16
5	31.80	5.42
6	37.08	6.24

a.	Calculate the arithmetic average returns for large-company stocks and T-bills over this period.

	Average returns
Large company stocks	%
T-bills	%

b.	Calculate the standard deviation of the returns for large-company stocks and T-bills over this period.

	Standard deviation
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 average risk premium over this period?

Average risk premium

%

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?

Standard deviation

%

Answer rating: 100% (QA)

Large Company Stocks Average return Tbills Average return a Arithmetic Average Returns Returns Numbe... View the full answer