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Problem 10-8 Risk Premiums [LO 2] Consider the following table for a period of six years

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Problem 10-8 Risk Premiums [LO 2] Consider the following table for a period of six years. Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Returns Large-Company U.S. Stocks Treasury Bills - 16.59% 7.67% - 27.04 8.18 37.61 6.25 24. 31 6.97 - 7.92 5.64 6.95 8.21 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 a percentage rounded' to 2 decimal places (e.g., 32.16).) as Large-company stock T-bills Arithmetic average returns 2.89% 7.15 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).) Large-company stock T-bills Standard deviation 24.79% 1.06% 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 -1.71% (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 25.34%