You’ve observed the following returns on Yasmin Corporation’s stock over the past five years: 15 percent, –15 percent, 17 percent, 27 percent, and 10 percent. Suppose the average inflation rate over this period was 1.6 percent and the average T-bill rate over the period was 4.1 percent.
a. Find the average real risk-free rate.
b. Find the average real risk premium.