Question
You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 8 percent, -11 percent, 22 percent, 33 percent, and 18 percent.Suppose
You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 8 percent, -11 percent, 22 percent, 33 percent, and 18 percent.Suppose the average inflation rate over this period was 3.36 percent and the average T-bill rate over the period was 4.54 percent. What was the average real risk premium over this time period?
[Hint:Step 1: Calculate the average real rate of return for Crash-n-Burn Computer.Step 2: Calculate the average real rate of return for the T-bill.Step 3: Subtract (average real rate of return for Crash-n-Burn Computer) - (average real rate of return for the T-bill).
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