hw2

library(readr)
data <- read_csv("data of hw2.csv")

## New names:
## Rows: 1068 Columns: 7
## ── Column specification
## ──────────────────────────────────────────────────────── Delimiter: "," dbl
## (7): ...1, SMALL LoBM, ME1 BM2, SMALL HiBM, BIG LoBM, ME2 BM2, BIG HiBM
## ℹ Use `spec()` to retrieve the full column specification for this data. ℹ
## Specify the column types or set `show_col_types = FALSE` to quiet this message.
## • `` -> `...1`

print(data)

## # A tibble: 1,068 × 7
##      ...1 `SMALL LoBM` `ME1 BM2` `SMALL HiBM` `BIG LoBM` `ME2 BM2` `BIG HiBM`
##     <dbl>        <dbl>     <dbl>        <dbl>      <dbl>     <dbl>      <dbl>
##  1 193001         6.05      9.56         8.46      7.17       3.40       2.84
##  2 193002         1.75      1.05         4.38      3.46       1.90       1.22
##  3 193003         8.64     11.4         10.8       6.82       8.36       5.34
##  4 193004        -7.07     -1.23        -3.48     -2.36      -1.71      -6.66
##  5 193005        -3.62     -2.42        -2.96      0.706     -2.26      -1.41
##  6 193006       -17.5     -16.5        -18.9     -17.8      -13.1      -11.8 
##  7 193007         6.52      3.73         2.43      4.71       3.55       5.28
##  8 193008        -3.76     -1.61        -2.27      1.02      -0.66      -1.70
##  9 193009       -13.7     -14.7        -18.8     -12.4      -10.9      -17.2 
## 10 193010       -10.1      -7.68       -10.7      -9.35      -7.27     -11.5 
## # ℹ 1,058 more rows

# Given probabilities and expected returns for equities
probabilities <- c(0.6, 0.4)
returns_equities <- c(50000, -30000)
# Risk-free return (T-bills)
return_tbill <- 5000
expected_return_equities <- sum(probabilities * returns_equities)
print(paste("Expected return for equities:", expected_return_equities))

## [1] "Expected return for equities: 18000"

risk_premium <- expected_return_equities - return_tbill
print(paste("Risk premium:", risk_premium))

## [1] "Risk premium: 13000"