Homework SourseCalculate the arithmetic average returns for largecompany st
Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Calculate the standard deviation of the returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
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? (Negative amount 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.)
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.)
| Year | Large Company | US Treasury Bill |
| 1 | 3.92 | 5.90 |
| 2 | 14.18 | 2.53 |
| 3 | 19.37 | 3.76 |
| 4 | –14.31 | 7.16 |
| 5 | –31.80 | 5.42 |
| 6 | 37.08 | 6.24 |
Solution
Solution:
| Average Return = Sum of Returns / Number of years | ||
| Year | Company Stock | US Treasury Bill |
| 1 | 3.92% | 5.90% |
| 2 | 14.18% | 2.53% |
| 3 | 19.37% | 3.76% |
| 4 | -14.31% | 7.16% |
| 5 | -31.80% | 5.42% |
| 6 | 37.08% | 6.24% |
| Sum | 28% | 31% |
| Number of years | 6 | 6 |
| Average Return = | 4.74% | 5.17% |
