Hwo Questlon 1 (of 5) 20.00 peints Assume these are the stook market and Treasur

Question

Hwo Questlon 1 (of 5) 20.00 peints Assume these are the stook market and Treasury bill retuns for a S year period 4.70 ear Year 3 Year 4 33.33 32 50 3.76 4.68 20.26 1.10 30 07 ear 5 a. vhat won he prensm oncommon stockin each year? (Negative amounts should be indicated by a minus sign Do not round intermediate calculations. Enter your answers as a percent rounded to 2 Year 2 Year 3 Year 4 Year 5 b. What was the average risk premium? (Do not round intermediate calculations Enter your answer as a percent reunded to 2 decimal places) e. w.at was the sla dad deviation of reprenum? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Standard deviation

Explanation / Answer

a)

Risk premium :

b)

Average risk premium = 31.61 / 5 = 6.322

c)

Standard Deviation = SqRt (dx2 / n) = SqRt (3096.40 / 5) = SqRt (619.28) = 24.88

Year Risk Premium = Market return - T-Bill return dx= risk premium - 13.46 dx2 1 -33.33 - 4.70 = -38.03 -51.49 2651.22 2 32.50 - 1.10 = 31.40 17.94 321.84 3 13.76 - 0.30 = 13.46 0 0 4 4.68 - 0.07 = 4.61 -8.85 78.32 5 20.26 - 0.09 = 20.17 6.71 45.02 Total n = 5 31.61 3096.40

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