1. Consider these long-term investment data:

The price of a 10-year $100 par value zero-coupon inflation-indexed bond is $84.49.

A real-estate property is expected to yield 2% per quarter (nominal) with a SD of the

(effective) quarterly rate of 10%.

1. Compute the annual rate of return on the real (i.e., inflation-indexed) bond.
2. Compute the continuously compounded annual risk premium on the real-estate investment.