Question 4 (a) Contrast the nominal rate of interest with the real rate of interest. [2 marks] (b) Why would "a belief in the segmented markets theory of the term structure" implies "a belief in market inefficiency". [2 marks] Suppose you purchased a stock at the end of 2017 and sold it at the end of 2019. The year-end stock prices are shown below and the stock paid no dividends. 2017 2018 2019 $100 $112 $100 (i) Compute the average annual return according to the arithmetic mean method. [2 marks] (ii) Compute the average annual return according to the geometric mean method. [2 marks] (iii) Compare the results in (i) and (ii), and indicate which is more intuitively appealing in assessing the performance of your investment. [2 marks]