What was the standard deviation of the risk premium

Reference no: EM131960772

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 ? %

Reference no: EM131960772

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