Suppose we have the following returns for large-company stocks and Treasury bill

Question

Suppose we have the following returns for large-company stocks and Treasury bills over a six year period:

Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Round your answers to 2 decimal places. (e.g., 32.16))

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

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? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

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 round your final answer to 2 decimal places. (e.g., 32.16))

Suppose we have the following returns for large-company stocks and Treasury bills over a six year period:

Explanation / Answer

Average Return =

4.62

Large Company =4.42%

5.59

US Treasury Bill=5.59%

Year Large Company US Treasury Bill 1    3.95 6.53 2   14.13 4.38 3   19.07 4.25 4 –14.61 7.3 5 –32.10 4.94 6   37.32 6.14 27.76/6 33.54

Average Return =

4.62

Large Company =4.42%

5.59

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