P5-2: Assume these were the inflation rates and U.S. stock market and Treasury bill returns between 1929 and 1933:

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?

(Pending to answer parts C and D)

Year Inflation (%) 1929 0.2 1930 -4.4 1931 -8.8 1932 -11.6 1933 0.6 Stock Market Return (%) -13.4 -23.0 -43.3 -9.0 61.1 T-Bill Return (%) 6.8 2.6 1.6 1.0 0.5 Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D What was the real return on the stock market in each year? (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Year Real Return 1929 (13.57) % 1930 (19.46) % 1931 (37.83) % 1932 2.94 % 1933 60.14 % Required A Required B Required C Required D What was the average real return? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Average real return (1.56) % Required A Required B Required C Required D What was the risk premium in each year? (Negative answers should be indicated by a minus sign. Enter your answers as a percent rounded to 2 decimal places.) Year Risk Premium 1929 % 1930 1931 1932 1933 % % % % Required A Required B Required C Required D What was the average risk premium? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Average risk premium %