Reference no: EM132488043

Suppose we have the following returns for large-company stocks and Treasury bills over a six-year period:

Year Large Company US Treasury Bill

1        3.98                    4.56

2       14.33                    4.92

3      19.17                      3.84

4      -14.51                     6.98

5        -32.00                    5.22

6           37.41                   5.36

Question a. 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 percent rounded to 2 decimal places, e.g., 32.16.)

Question b. 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 percent rounded to 2 decimal places, e.g., 32.16.)

Question c-1 Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the arithmetic average risk premium over this period? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Question 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? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)