Chapter 10, Problem 8QAP

A

Summary Introduction

Adequate information:

To compute: Average return on large company stock and T-bills

Introduction: Average return is defined as the average of all the returns earned during a period. It can be computed by dividing all the returns in different years by the number of years.

B

Summary Introduction

Adequate information:

Years	Large company stock returns (%)	T-bills returns (%)
1973	-14.69	7.29
1974	-26.47	7.99
1975	37.23	5.87
1976	23.93	5.07
1977	-7.16	5.45
1978	6.57	7.64
Total	19.41	39.31
Average return	3.24	6.55

To compute: The standard deviation for the returns.

Introduction: The standard deviation is defined as the statistical calculation to derive the square root of the variance of the data provided.

C

Summary Introduction

Adequate information:

Years	Large company stock returns (%)(A)	T-bills returns (%)(B)	Risk premium (A-B)
1973	-14.69	7.29	-21.98
1974	-26.47	7.99	-34.46
1975	37.23	5.87	31.36
1976	23.93	5.07	18.86
1977	-7.16	5.45	-12.61
1978	6.57	7.64	-1.07
Total	19.41	39.31	-19.90

To compute: The average return and standard deviation.

Introduction: The standard deviation is defined as the statistical calculation to derive the square root of the variance of the data provided.