1. Youve observed the following returns on Crash-n-Burn Computers stock over the past five years: 10 percent, 11 percent, 18 percent, 19 percent, and 10 percent. Suppose the average inflation rate over this period was 2.2 percent and the average T-bill rate over the period was 4.7 percent.

a.	What was the average real return on Crash-n-Burns stock? (Round your answer to 2 decimal places. (e.g., 32.16))

Average real return

%

b.	What was the average nominal risk premium on Crash-n-Burns stock? (Round your answer to 1 decimal place. (e.g., 32.1))

Average nominal risk

%

2.

	Returns
Year	X			Y
1		16	%		20	%
2		19			31
3		10			15
4		8			17
5		10			21

Using the returns shown above, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y. (Round your percent answers to 2 decimal places. (e.g., 32.16) and variances to 5 decimal places. (e.g., 32.16161))

X

Y

Average returns

%

%

Variances

Standard deviations

%

%

3. Suppose you bought a 6.2 percent coupon bond one year ago for $900. The bond sells for $930 today.

a.	Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?

Total dollar return

$

b.	What was your total nominal rate of return on this investment over the past year? (Round your answer to 2 decimal places. (e.g., 32.16))

Nominal rate of return

%

c.	If the inflation rate last year was 2 percent, what was your total real rate of return on this investment? (Round your answer to 2 decimal places. (e.g., 32.16))

Real rate of return

%