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Problem 12-10 Calculating Real Returns and Risk Premiums [LO1] You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 13 percent,
Problem 12-10 Calculating Real Returns and Risk Premiums [LO1] You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 13 percent, -8 percent, 16 percent, 16 percent, and 10 percent. Suppose the average inflation rate over this period was 1.5 percent and the average T-bill rate over the period was 5 percent. ed 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. 3.45 % Average real return Average nominal risk premium b. 4.3 %
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