You are given the following long-run annual rates of return for alternative investment instruments: U.S. Government T-bills 3.50%         [0.0048]  Large-cap common stock  11.75   [ ]     Long-term corporate bonds 5.50       [ ] Long-term government bonds  4.90        [ ]  Small-capitalization common stock  13.10       [ ] The annual rate of inflation during this period was 3 percent. Compute the real rate of return on these investment alternatives.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You are given the following long-run annual rates of return for alternative investment instruments:

U.S. Government T-bills

3.50%       

 [0.0048]

 Large-cap common stock 

11.75  

[ ]    

Long-term corporate bonds

5.50    

  [ ]

Long-term government bonds

 4.90    

   [ ]

 Small-capitalization common stock 

13.10

      [ ]

The annual rate of inflation during this period was 3 percent. Compute the real rate of return on these investment alternatives.

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