You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 4 percent, -12 percent, 26 percent, 16 percent, and 16 percent. The average inflation rate over this period was 3.6 percent and the average T-bill rate was 5 percent.
Requirement 1: What was the average real return on Crash-n-Burn’s stock? (Do not round intermediate calculations.)
a. 13.96% b. 6.49% c. 5.87% d. 6.18% e. 6.80%
Requirement 2: What was the average nominal risk premium on Crash-n-Burn’s stock? (Do not round intermediate calculations.)
a. 25% b. 4.05% c. .62% d. 3.55% e. 4.55%