1) Youve observed the following returns on Crash-n-Burn Computers stock over the past five years: 2 percent, -9 percent, 29 percent, 14 percent, and 13 percent. The average inflation rate over this period was 3.2 percent and the average T-bill rate was 4.95 percent.

Requirement 1:

What was the average real return on Crash-n-Burns stock?

13.31%

6.08%

6.72%

7.03%

6.40%

Requirement 2:

What was the average nominal risk premium on Crash-n-Burns stock?

0.64%

4.41%

4.855

3.93%

3.44

2) A stock had returns of 12 percent, 15 percent, 10 percent, -10 percent, 16 percent, and -4 percent over the last six years.

a) What is the arithmetic return for the stock?

6.70%

6.50%

6.83%

6.60%

7.80%

b)What is the geometric return for the stock?

6.02%

7.26%

6.74%

6.12%

5.82%