Using historical risk premiums from Table 5.5 over the 19272018 period as your guide, what would be your estimate of the expected annual HPR on the Big/Value portfolio if the current risk-free interest rate is 2.10%? (Round your answer to 2 decimal places.)

expexted annual HPR =

2. During a period of severe inflation, a bond offered a nominal HPR of 79% per year. The inflation rate was 68% per year. a. What was the real HPR on the bond over the year? (Round your answer to 2 decimal places.)

Real HPA %

b. Find the approximation r_real r_nom i. Compare your answer in part b to the one in part a.

Approximation %