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Problem 12-10 Calculating Real Returns and Risk Premiums [LO1] Youve observed the following returns on Crash-n-Burn Computers stock over the past five years: 10 percent,
Problem 12-10 Calculating Real Returns and Risk Premiums [LO1]
Youve observed the following returns on Crash-n-Burn Computers stock over the past five years: 10 percent, 10 percent, 17 percent, 22 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 3 percent. |
a. | What was the average real return on the companys 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 companys stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.) |
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