You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 19 percent, –13 percent, 16 percent, 21 percent, and 1O percent. Suppose the average inflation rate over this period was 1.4 percent and the average T-bill rate over the period was 4.5 percent. a. What was the average real return on the company's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the average nominal risk premium on the company's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 19 percent, –13 percent, 16 percent, 21 percent, and 1O percent. Suppose the average inflation rate over this period was 1.4 percent and the average T-bill rate over the period was 4.5 percent. a. What was the average real return on the company's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the average nominal risk premium on the company's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You've observed the following returns on Crash-n-Burn Computer's stock over
the past five years: 19 percent, -13 percent, 16 percent, 21 percent, and 10
percent. Suppose the average inflation rate over this period was 1.4 percent
and the average T-bill rate over the period was 4.5 percent.
a. What was the average real return on the company's stock? (Do not round
intermediate calculations and enter your answer as a percent rounded to
2 decimal places, e.g., 32.16.)
b. What was the average nominal risk premium on the company's stock? (Do
not round intermediate calculations and enter your answer as a percent
rounded to 1 decimal place, e.g., 32.1.)
а.
Average real return
%
b. Average nominal risk premium
%
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