Here are inflation rates and U.S. stock market and Treasury bill returns between 1929 and 1933:

Year Inflation Stock Market Return T-Bill Return 1929 .2 14.5 4.8 1930 6.0 28.3 2.4 1931 9.5 43.9 1.1 1932 10.3 9.9 1.0 1933 .5 57.3 .3

a. What was the real return on the stock market in each year?

b. What was the average real return?

c. What was the risk premium in each year?

d. What was the average risk premium?

e. What was the standard deviation of the risk premium?

Visit us at www.mhhe.com/bma Visit us at www.mhhe.com/bma 182 Part Two Risk AppendixLO1