1. Calculating Returns and Variability. You’ve observed the following returns on Crash-n-Burn Computer's stock over the past five years: 7percent, -13 percent, 21 percent, 34 percent and 15 percent.
a. What was the arithmetic average return on Crash-n-Burn's stock over this five year period?
b. What was the variance of Crash-n-Burn's returns over this period? The standard deviation?
2. Calculating Real Returns and Risk Premiums. For problem 9, 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.
a. What was the average real return on Crash-n-Burn's stock?
b. What was the average nominal risk premium on Crash-n-Burn's stock?