Calculate the observed risk premium in each year for the

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Reference no: EM13620746

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?

Reference no: EM13620746

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