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    Return and Risk of small-company stocks

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    Carib and Heinekin have reported the returns on small company stocks and U.S. Treasury bills for the period 1986 - 1991 as follows

    Year small company stocks u.s treasury bills

    1986 6.85% 6.16%
    1987 -9.30 5.47
    1988 22.87 6.35
    1989 10.18 8.37
    1990 -21.56 7.81
    1991 44.63 5.60

    a. Calculate the average returns on small-company stocks and u.s. treasury bills.

    b. calculate the variances and standard deviations of the returns on small-company stocks and u.s. treasury bills.

    c. compare the returns and risks of these two types of securities.

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    Solution Summary

    The solution calculates average returns, variances and standard deviations of the returns of small-company stocks and U.S. treasury bills and compares the returns and risks of these two types of securities.

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