1. An investment offers a 15.0 percent total return over the coming year. Bill Bernanke thinks the total real return on this investment will be only 5.5 percent. What does Bill believe the inflation rate will be over the next year?
2. Say you own an asset that had a total return last year of 10.5 percent. If the inflation rate last year was 4 percent, what was your real return?
3. A share of stock with a beta of 0.75 sells for $50. Investors expect the stock to pay a year-end dividend of $2. If the stock is perceived to be fairly priced today, what must be investor's expectation of the price of the stock at the end of the year?