Calculating Real Rates You have observed the following returns on Crash-n-Burn Computer’s equity over the past 5 years: 7 per cent, –12 per cent, 11 per cent, 38 per cent, and 14 per cent. Suppose the average inflation rate over this period was 3.5 per cent and the average Tbill rate over the period was 4.2 per cent.

(a) What was the average real risk-free rate over this time period?

(b) What was the average real risk premium?