Question: Consider the following table for a period of six years.
|
Returns |
| Year |
Large-Company
Stocks |
U.S.
Treasury Bills |
| Year 1 |
-14.89% |
7.33% |
| Year 2 |
-26.53 |
8.01 |
| Year 3 |
37.27 |
5.91 |
| Year 4 |
23.97 |
5.27 |
| Year 5 |
-7.24 |
5.47 |
| Year 6 |
6.61 |
7.70 |
Requirement 1: Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
Arithmetic average returns
Large-company stock ? %
T-bills ? %
Requirement 2: Calculate the standard deviation of the returns for large-company stocks and T-bills over this time period. (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
Standard deviation
Large-company stock ? %
T-bills ? %
Requirement 3: Calculate the observed risk premium in each year for the large-company stocks versus the T-bills.
(a) What was the arithmetic average risk premium over this period? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Risk premium ?%
(b) What was the standard deviation of the risk premium over this period? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Risk premium standard deviation ? %