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

a) large com stocks = 4.73%

T bill = 5.15

B) stdev of large com stocks = 24.85

stdev of t bill = 1.05

C) risk premium of each year

stdev = 25.29

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