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Suppose we have the following returns for large-company stocks and Treasury bills over a six year period. Suppose we have the following returns for large-company stocks and Treasury bills over a six year period. Year Large Company US Treasury Bill 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 Calculate the arithmetic average returns for large-company stocks and T-bills over this period. Calculate the standard deviation of the returns for large-company stocks and T-bills over this period. 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? 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?

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