Utilizing the data in the attached files calculate:
1. The risk premiums on the TSX and on long term government bonds in each of the years.
2. What were the average risk premiums for the TSX and long term government bonds
3. Calculate the standard deviation of each risk premium.
4. Calculate the average rate of return and standard deviation of returns for the TSX, government bonds and Treasury bills between 2010 and 2014.
5. Form a portfolio with one third in each of the three classes and calculate its average rate of return and standard deviation. Is there any benefit to diversification?
Comment on these standard deviations
|
Year
|
TSXReturn
|
T Bill Return
|
Government Long Bond Return
|
|
|
|
|
|
2010
|
0.2215
|
0.0064
|
0.0317
|
|
2011
|
-0.0812
|
0.0093
|
0.0276
|
|
2012
|
0.0187
|
0.0096
|
0.0183
|
|
2013
|
0.0796
|
0.0097
|
0.0227
|
|
2014
|
0.0715
|
0.0092
|
0.0218
|