In Problem 9, suppose the average inflation rate over this period was 2.6 percent and the average T-bill rate over the period was 3.25 percent.

a. What was the average real return on the company’s stock?

b. What was the average nominal risk premium on the company’s stock?

Data from Problem 9

You’ve observed the following returns on Bennington Corporation’s stock over the past five years: 21 percent, −11 percent, 8 percent, 17 percent, and 13 percent.