You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 12 percent, –12 percent, 19 percent, 24 percent, and 10 percent. Suppose the average inflation rate over this period was 2.5 percent and the average T-bill rate over the period was 3.2 percent.
a. What was the average real return on Crash-n-Burn’s stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Average real return %
b. What was the average nominal risk premium on Crash-n-Burn’s stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place, e.g., 32.1.)
Average nominal risk premium %