You've observed the following returns on Pine Computer's stock over the past fiveyears: -28.5 percent, 16 percent, 35 percent, 3.5 percent, and 22.5 percent. Theaverage inflation rate over this period was 3.35 percent and the average T-bill rate overthe period was 4.3 percent.a. What was the average real risk-free rate over this time period?Note: Do not round intermediate calculations and enter your answer as apercent rounded to 2 decimal places, e.g., 32.16.b. What was the average real risk premium?Note: Do not round intermediate calculations and enter your answer as apercent rounded to 2 decimal places, e.g., 32.16.× Answer is not complete.a. Average real risk-free rateb. Average real risk premium0.93%%

Part 2: Explanation:Step 1: Calculate the average nominal risk-free rate:The average T-bill rate…

Answered: You've observed the following returns…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 17P

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Vijay
You've observed the following returns on Pine Computer's stock over the past five years: 8 percent, -12 percent, 14 percent, 21 percent, and 16 percent. The average inflation rate over this period was 3.1 percent and the average T-bill rate over the period was 4.1 percent. a. What was the average real return on the stock? Note: 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 stock? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Average real return b. Average nominal risk premium % %
Bhupatbhai
You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 12 percent, -9 percent, 20 percent, 17 percent, and 10 percent. Suppose the average inflation rate over this period was 3.2 percent and the average T-bill rate over the period was 4.9 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.) a. Average real return b. Average nominal risk premium %
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