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(Solution document) Consider the following rates of return: Year Large Company Stocks US Treasury Bills 1 3.98% 4.56% 2 14.92 3 19.84 4 -14.98 5 -32.


Consider the following rates of return:


Year              Large Company Stocks      US Treasury Bills

1 3.98% 4.56%

2                            14.33 4.92

3 19.17      3.84

4       -14.51 6.98

5 -32.00 5.22

6 37.41 5.36


C. 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?


Average Risk Premium 16.34%?


C2. 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?


Standard Deviation                  15.67?


Am I missing something in my equations? Am I rounding up too much?

 







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