Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You've observed the following returns on Pine Computer's stock over the past five years: 16 percent, -5 percent, 19 percent, 13 percent, and 10 percent.

image text in transcribed
You've observed the following returns on Pine Computer's stock over the past five years: 16 percent, -5 percent, 19 percent, 13 percent, and 10 percent. Suppose the average inflation rate over this period was 2.2 percent and the average T-bill rate over the period was 5.3 percent a. What was the average real risk-free rate over this time period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the average real risk premium? (Do nofround intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. a. Average real risk-free rate 3.03% b. Average real risk premium 5.30 %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing And Assurance Services An Integrated Approach

Authors: Arens, Elder, Beasley

9th Edition

0130646202, 9780130646200

More Books

Students also viewed these Accounting questions