Consider the following table for a period of six years. Returns Large-Company Stocks -14.69% -26.47 37.23 23.93 -7.16 6.57 Year 1973 1974 1975 1976 1977 1978 U.S. Treasury Bills 6.93% 8.00 5.80 5.08 5.12 7.18 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. Note: Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. Calculate the standard deviation of the returns for large-company stocks and T-bills over this time period. Note: Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. 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? Note: A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. d. What was the standard deviation of the risk premium over this period? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
Consider the following table for a period of six years. Returns Large-Company Stocks -14.69% -26.47 37.23 23.93 -7.16 6.57 Year 1973 1974 1975 1976 1977 1978 U.S. Treasury Bills 6.93% 8.00 5.80 5.08 5.12 7.18 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. Note: Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. Calculate the standard deviation of the returns for large-company stocks and T-bills over this time period. Note: Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. 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? Note: A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. d. What was the standard deviation of the risk premium over this period? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Transcribed Image Text:Consider the following table for a period of six years.
Returns
Year Large-Company Stocks
1973
1974
1975
1976
1977
1978
-14.69%
-26.47
37.23
23.93
-7.16
6.57
U.S. Treasury
Bills
6.93%
8.00
5.80
5.08
a. Calculate the arithmetic average returns for large-company stocks and T-bills over this time period.
Note: Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places,
e.g., 32.16.
5.12
7.18
b. Calculate the standard deviation of the returns for large-company stocks and T-bills over this time period.
Note: Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places,
e.g., 32.16.
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?
a. Large company stock
T-bills
b. Large company stock
T-bills
Note: A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.
d. What was the standard deviation of the risk premium over this period?
c. Risk premium
d. Standard deviation
Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places,
e.g., 32.16.
%
%
%
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