The following data are the retums for 1980 through 1986 on five types ofcapital-market instruments: common stocks, small-capitilzation stocks, long-temm corporate bonds, long-tem US- government bonds, and U.S. Treasury Bills. You may wish to use a spreadsheet program to make your calculations
|
Year
|
Common Stock
|
Small Stocks
|
Long-term Corporate
Bonds
|
Long-term . Government
Bonds
|
S. Treasury
Bills
|
|
1980
|
0.3242
|
0.3988
|
-0.0262
|
-0.0395
|
0.1124
|
|
1981
|
-0.0491
|
0.1388
|
-0.0096
|
0.0185
|
0.1471
|
|
1982
|
0.2141
|
0.2801
|
0.4379
|
0.4035
|
0.1054
|
|
1983
|
0.2251
|
0.3967
|
0.0470
|
0.0068
|
0.0880
|
|
1984
|
0.0627
|
-0.0667
|
0.1639
|
0.1543
|
0.0985
|
|
1985
|
0.3216
|
0.2466
|
0.3090
|
0.3097
|
0.0772
|
|
1986
|
0.1847
|
0.0686
|
0.1985
|
0.2444
|
0.0616
|
1. Calculate the holding period return for US treasury bills for the 7 year holding period of 1980 through 1986
2. Using the average US treasury Bill rate as a proxy rate, what was the average risk premium for small company common stocks for the 7 year period
3. Using the average US treasury Bill rate as a proxy rate, what was the average risk premium for Long term corporate bonds for the 7 year period.