Problem:
You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 14 percent, -9 percent, 16 percent, 21 percent, and 3 percent. Suppose the average inflation rate over this period was 3.5 percent and the average T-bill rate over the period was 4.2 percent.
Requirement:
Question: What was the average real risk-free rate over this time period?
Note: Provide support for your rationale.