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Problem 12-10 Calculating Real Returns and Risk Premiums (LO1] 13 You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 14
Problem 12-10 Calculating Real Returns and Risk Premiums (LO1] 13 You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 14 percent. -9 percent, 16 percent, 21 percent, and 3 percent. Suppose the average inflation rate over this period was 3.5 percent and the average T-bill rate over the period was 4.2 percent. a. What was the average real return on the company's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the average nominal risk premium on the company's stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) a. Average real return b. Average nominal risk premium 6.59% 5.11%
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