Question

eztomheducation.com SB assignment for Ch.10 + E connect FINANCE2019-BBAZ16007: D2 # assignment for Ch.10 instructions I help [ Question 1 of 3) Save & Ext Submit 1. 10.00 points Consider the following table for a period of six years. 1973 1974 1975 1976 Returns Large-Company US Stocks Treasury Bals - 14.69% 7 29% - 26.47 37 23 5.87 23.93 5.07 - 7.16 6.57 7.64 1978 Requirement 1: Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (... 32.16).) Arithmetic average returns Large company stock T-bils Requirement 2: Calculate the standard deviation of the returns for large-company stocks and T-bills over this time period Do not round Intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places ... 32.16) Standard deviation

Answer 1

Requirement - Calculation of Arithmatic average returns. year Large Company on us. Stock (2) Treasury bills (4) 1973 - 14.69./ 7.29 % 1974 - 26.47 7.99 1975 37.23 (5.67 1976 2 23.93 5.07 1977 5.45 1978 a 6.57 67.64 EX= 19.41 {y= 39.1 verage rechern 39. 11 6 Years u 6 years = 3-2356 26.5183 con (or) 3.94% 6.52.1. 19.4 ears | Average return a sum of No. ob all rehims Years.

stock Requirement - 2 Calculation of standard deviation of large Company stock Let u be the returns of large Company X = 3.94% lie, Mean) Year x x- u (x-7² 1973 - 14.69 - 17.93 391.4849 1974 -26.47 -29.71 8826801 1975 37.23 33.99 1155-3201 1976 23.93 20.69 428-0761 1977 -7.16 - 10.4 108.16 1978 6. S7 1 3.33 11.0889 Ecu-n-2908.8141 standard deviation = {(x-22 In nebyears 2906.8141 6 7484.4691 = 29.0106 (01) 99.01/ U.S. Treasury bills Standard deviation of is "or.

Treasury bills are risk Ree because those are Issued by US Government. The fox Risk of Treasury bills are "zero".

Requirement -3 Calculation of risk Premium in each year. Year Large Company Stock (a) 1973 1974 1975 1976 1977 1978 - 14.69/ - 26.47 37.23 23.93 -7.16 6.57 us. Treasury Risk Premiu bill (a-b) 7.29% -21.98 7.99 - 34.46 5:67 31.56 5.07 18.86 s.us - 12.61 - 1.07 - 19. 7 Premium - - 19 7 6 years --3-28 / 7.64 Avera age C

Calculation of Standard deviation of Risk Premiu Let 'a be Risk Premium á -3.28 (e, mean) Year 1973 1974 1975 1976 1977 1978 a a- (a-ā) 2 - 21-98 1 - 18.7 349.69 - 34.46 - 31.18 972-1924. 31.56 34.84 1913.8256 18.86 29.14 490.1796 -12.61 : 9.33 87.0489 - 1.07 2. 21 4.8841 3117-8206 SO 3117.8206 3117:8206 6 years 22-7955% COU 22.80%