Homework answers / question archive / Suppose we have the following returns for large-company stocks and Treasury bills over a six-year period:   Year              Large Company %             US TreasuryBill % 1                         4

Suppose we have the following returns for large-company stocks and Treasury bills over a six-year period:   Year              Large Company %             US TreasuryBill % 1                         4

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

Year              Large Company %             US TreasuryBill %

1                         4.00                                   4.62

 2                       14.49                                  4.96 

3                        19.33                                  3.88 

4                        -14.35                                  7.00 

5                        -31.84                                  5.38 

6                          37.04                                 6.43 

a) Calculate the arithmetic average returns for large-company stocks and T-bills over this time period.

b) Calculate the standard deviation of the returns for large-company stocks and T-bills over this time period.

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?

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?