Question 1:

Youve observed the following returns on Crash-n-Burn Computers stock over the past five years: 5 percent, -8 percent, 24 percent, 16 percent, and 15 percent. The average inflation rate over this period was 3 percent and the average T-bill rate was 3.3 percent.

Requirement 1:

What was the average real return on Crash-n-Burns stock? (Do not round intermediate calculations.)

(Click to select) 7.90%, 6.83%, 7.18%, 13.71%, 7.54%

Requirement 2:

What was the average nominal risk premium on Crash-n-Burns stock? (Do not round intermediate calculations.)

(Click to select) 5.75%, 7.10%, 0.72%, 6.46%, 5.04%

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Question 2:

Consider the following information:

		Rate of Return if State Occurs
State of Economy	Probability of State of Economy	Stock A	Stock B
Recession	0.10	0.06	-0.17
Normal	0.50	0.09	0.16
Boom	0.40	0.12	0.33

Required:

(a)	Calculate the expected return for Stock A. (Do not round your intermediate calculations.)
	(Click to select)9.90%8.52%11.64%10.70%9.05%

(b)	Calculate the expected return for Stock B. (Do not round your intermediate calculations.)
	(Click to select)19.50%10.67%21.48%18.52%20.28%

(c)	Calculate the standard deviation for Stock A. (Do not round your intermediate calculations.)
	(Click to select)1.92%1.36%2.02%1.82%2.00%

(d)	Calculate the standard deviation for Stock B. (Do not round your intermediate calculations.)
	(Click to select)14.57%10.30%16.30%13.84%15.15%