Suppose we have the following returns for large-company stocks and Treasury bills over a six year period:
Year: 1 Large Company: 3.96 U.S. Treasury Bill: 4.50
Year: 2 Large Company: 14.12 U.S. Treasury Bill: 4.88
Year: 3 Large Company 19.01 U.S. Treasury Bill: 3.80
Year: 4 Large Company: -14.67 U.S. Treasury Bill: 6.96
Year: 5 Large Company: -32.16 U.S. Treasury Bill: 4.88
Year: 6 Large Company: 37.26 U.S. Treasury Bill: 6.14
a.Calculate the arithmetic average returns for large-company stocks and T-bills over this period.
b.Calculate the standard deviation of the returns for large-company stocks and T-bills over this period
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?
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?
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?