you've observed the following returns on Pine Computer's stock over the past five years: -29.7 cent, 16.8 percent, 36.6 percent, 3.9 percent, and 22.9 percent. The average inflation rate over thi iod was 3.39 percent and the average T-bill rate over the period was 4.3 percent. a. What was th rage real risk-free rate over this time period? b. What was the average real risk premium?

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Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.