Assume that over the last several decades, the annual returns on large-company common stocks averaged 12.1 percent, small-company stocks averaged 16.5 percent, long-term government bonds averaged 6 percent, and U.S. T-bills averaged 3.4 percent. What was the average excess return or risk premium earned by long-term government bonds, and small- company stocks respectively?

You invested in long-term corporate bonds and earned 6.1 percent. During that same time period, large-company stocks returned 12.6 percent, long-term government bonds returned 5.7 percent, U.S. Treasury bills returned 4.2 percent, and inflation averaged 3.8 percent. What average risk premium did you earn? Is this good or bad and why?

The average annual return on the S&P 500 Index from 1996 to 2005 was 13.27 percent. The average annual T-bill yield during the same period was 3.92 percent. What was the market risk premium during these ten years? (Round your answer to 2 decimal places.)

book nt Consider the following table for a period of six years: Returns U.S. Treasury Year Large-Company Stocks Bills 1 -14.99% 7.35% 2 -26.56 8.02 3 37.29 5.93 4 23.99 5.37 5 -7.28 5.48 6 6.63 7.73 a-1. Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a-2. Calculate the standard deviation of the returns for large-company stocks and T-bills over this time period. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. int Large-company stocks T-bills a-1. Arithmetic average return a-2. Standard deviation % % % % ences Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. b-1. What was the arithmetic average risk premium over this period? Note: A negative answer should be indicated by a minus sign. Do not…

Over a certain period, large-company stocks had an average return of 12.79 percent, the average risk-free rate was 2.62 percent, and small-company stocks averaged 17.61 percent. What was the risk premium on small-company stocks for this period?

Suppose interest rates on Treasury bonds rose from 5% to 9% as a result of higher interest ratesin Europe. What effect would this have on the price of an average company’s common stock?

The following table summarizes the yields to maturity on several​ one-year, zero-coupon​ securities: What is the price​ (expressed as a percentage of the face​ value) of a​ one-year, zero-coupon corporate bond with a AAA​ rating? What is the credit spread on​ AAA-rated corporate​ bonds? What is the credit spread on​ B-rated corporate​ bonds? How does the credit spread change with the bond​ rating? Why?  ​(Round to three decimal​ places.)

Assume the following Risk Premiums: DRP  ?  LP = 0.25% MRP =1.15% 10-year Government bonds yield  4.65%  10-year corporate bonds yield 6.75%.   What is the default risk premium on corporate bonds?

Assume that over the past 88 years, U.S. Treasury bills had an average return of 3.5% as compared to 6.1% on long-term government bonds. What was the average risk premium on the long-term government bonds?

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