You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 4 percent, -11 percent, 30 percent, 16 percent, and 16 percent. The average inflation rate over this period was 3.8 percent and the average T-bill rate was 4.95 percent.
Requirement 1:
What was the average real return on Crash-n-Burn’s stock? (Do not round intermediate calculations.)
Choices: 15.22%, 6.59%, 7.28%, 6.94%, 7.63%
Requirement 2:
What was the average nominal risk premium on Crash-n-Burn’s stock? (Do not round intermediate calculations.)
Choices: 0.69%, 5.51%, 6.00%, 4.90%, 4.30%