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 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

a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

Average returns:

Large company stocks __%

T-bills __%

b. Calculate the standard deviation of the returns for large-company stocks and T-bills over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

Standard deviation:

Large company stocks __%

T-bills __%

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? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Average risk premium __%

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? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Standard deviation __%