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Problem: Assume we have the following returns for large-company stocks and Treasury bills over the 6 year period:

i) Year: 1 Large Company: 3.96 U.S. Treasury Bill: 4.50

ii) Year: 2 Large Company: 14.12 U.S. Treasury Bill: 4.88

iii) Year: 3 Large Company 19.01 U.S. Treasury Bill: 3.80

iv) Year: 4 Large Company: - 14.67 U.S. Treasury Bill: 6.96

v) Year: 5 Large Company: - 32.16 U.S. Treasury Bill: 4.88

vi) Year: 6 Large Company: 37.26 U.S. Treasury Bill: 6.14

problem1. Evaluate the arithmetic average returns for large-company stocks and T-bills during period.

problem2. Evaluate the standard deviation of returns for large-company stocks and T-bills during this period

problem3. Evaluate the observed risk premium in each year for large-company stocks versus the T-bills. What was average risk premium during this period?

problem4. Evaluate the observed risk premium in each year for large-company stocks versus the T-bills. What was the standard deviation of the risk premium during this period?

problem5. Evaluate the observed risk premium in each year for large-company stocks versus the T-bills. What was the standard deviation of the risk premium during this period?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M94215

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