Risk Premiums Refer to Table 10.1 in the text and look at the period from 1973 through 1978.
a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period.
b.Calculate the standard deviation of the returns for large-company stocks and T-bills over this period.
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? What was the standard deviation of the risk premium over this period?
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