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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Risk Premiums Consider the following common stock and T-bill returns for the period 1980-1986:
Â
|
Year |
Common Stocks |
T-Bills |
|
1980 |
32.60% |
12.00% |
|
1981 |
-5 |
15.2 |
|
1982 |
21.7 |
11.3 |
|
1983 |
22.6 |
8.9 |
|
1984 |
6.2 |
10 |
|
1985 |
31.9 |
7.7 |
|
1986 |
18.7 |
6.2 |
Â
a. Calculate the observed risk premium in each year for the common stocks.
Â
b. Calculate the average returns and the average risk premium over this period.
Â
c. Calculate the standard deviation of returns and the standard deviation of the risk premium.
d. Is it possible that the observed risk premium can be negative? Explain how this can happen and what it mea
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