Chapter 10

Question 8 Input area:

Year 1973 1974 1975 1976 1977 1978

Large Stocks -14.69% -26.47% 37.23% 23.93% -7.16% 6.57%

T-bills 7.29% 7.99% 5.87% 5.07% 5.45% 7.64%

Output area:

Large company stocks Year 1973 1974 1975 1976 1977 1978 Total Average return Variance = Standard deviation = T-bill returns Year 1973 1974 1975 1976 1977 1978 Actual Return Average Return Deviation Actual Return Average Return Deviation

Total Average return Variance = Standard deviation = -

Average observed risk premium Actual Year Return 1973 1974 1975 1976 1977 1978 Total Average return Variance = Standard deviation = -

Average Return

Deviation

1973 1974 1975 1976 1977 1978

U.S Treasury 7.29 7.99 5.87 5.07 5.45 7.64

Consumer price index 8.71 12.34 6.94 4.86 6.7 9.02

A.Calculate
Squared Deviation

B. Calculate the S

C. calculate the t

? What was the s

Squared Deviation

Squared Deviation

11.7

A.Calculate the Arithmetic average

B. Calculate the STandard Deviation

calculate the the observed risk premium in each year for the large company stocks versus

? What was the standard deviation of the risk premium over this period??

mpany stocks versus the the T - Bills.