Question

Assume these are the stock market and Treasury bill returns for a 5-year period: Year Stock...

Assume these are the stock market and Treasury bill returns for a 5-year period:

Year Stock Market Return (%) T-Bill Return (%)
2011 −36.43 2.40
2012 29.20 0.80
2013 16.36 0.17
2014 1.68 0.09
2015 17.16 0.11

A. What was the standard deviation of the risk premium? (

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Answer #1
Year Stock Market Return (%) T-Bill Return (%) Risk premium = Market return- t bill return
2011 -36.43 2.4 -38.83
2012 29.2 0.8 28.4
2013 16.36 0.17 16.19
2014 1.68 0.09 1.59
2015 17.16 0.11 17.05
Year Risk premium
2011 -38.83%
2012 28.40%
2013 16.19%
2014 1.59%
2015 17.05%
Average= 4.88%
Standard dev= 26.22%
Where
Average or Mean = Sum of all observations/Count of all observations
Sample Standard deviation =((∑k=1 to N (observationk – average))/(N-1))^(1/2)    
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