Question 1: Calculating returns and variability you have observed the following return on Mary ann Data Corporation's stock over the past five years: 216 percent, 21 percent, 4 percent, 16 percent, and 19 percent.
a. what was the arithmetic average return on Mary Ann's stock over this five-years period?
b. What was the variance of Mary Ann's returns over this period? The standard deviation?
suppose the average inflation rate over this period was 4.2 percent and the average T-bill rate over the period was 5.1 percent.
a. what was the average real return on Mary Ann's stock?
b. what was the average nominal risk premium on Mary Ann's stock?
Question 2: Calculating investment returns: You bought of the Bergen manufacturing Co.'s 8 percent coupon bonds one year ago for $1,028.50. These bonds make annual payments and mature six years from now. Suppose you decided to sell your bonds today. When the required return on the bonds is 7 percent. If the inflation rate was 4.8 percent over the past year, what would be your total real return on the investment?