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Youve observed the following returns on ABC Corporations stock over the past six years: 4 percent, 10 percent, 20 percent, 16 percent, 13 percent, and
Youve observed the following returns on ABC Corporations stock over the past six years: 4 percent, 10 percent, 20 percent, 16 percent, 13 percent, and 11 percent. What was the arithmetic average return on the stock over this five-year period? Using the information from the prior problem, suppose the average inflation rate over this period was 2.2 percent and the average T-bill rate over the period was 3.4 percent. a. What was the average real return on the stock? b. What was the average nominal risk premium on the stock?
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