You've observed the following returns on Pine Computer's stock over the past five years: -29.4 percent, 16.6 percent, 36.2 percent, 3.8 percent, and 22.8 percent. The average inflation rate over this period was 3.38 percent and the average T-bill rate over the 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 a percent 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 a percent rounded to 2 decimal places, e.g., 32.16. a. Average real risk-free rate b. Average real risk premium % %

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've observed the following returns on Pine Computer's stock over the past five years: -29.4 percent, 16.6 percent, 36.2 percent,
3.8 percent, and 22.8 percent. The average inflation rate over this period was 3.38 percent and the average T-bill rate over the 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 a percent 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 a percent rounded to 2 decimal places, e.g., 32.16.
a. Average real risk-free rate
b. Average real risk premium
%
%
Transcribed Image Text:You've observed the following returns on Pine Computer's stock over the past five years: -29.4 percent, 16.6 percent, 36.2 percent, 3.8 percent, and 22.8 percent. The average inflation rate over this period was 3.38 percent and the average T-bill rate over the 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 a percent 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 a percent rounded to 2 decimal places, e.g., 32.16. a. Average real risk-free rate b. Average real risk premium % %
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