Saturday 21 April 2018

You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 18 percent, –14 percent, 20 percent, 22 percent, and 10 percent. Suppose the average inflation rate over this period was 3.1 percent and the average T-bill rate over the period was 4.4 percent.

Problem 12-11 Calculating Real Rates [LO1]
You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 18 percent, –14 percent, 20 percent, 22 percent, and 10 percent. Suppose the average inflation rate over this period was 3.1 percent and the average T-bill rate over the period was 4.4 percent.

What was the average real risk-free rate over this time period? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

  Average real risk-free rate %  

What was the average real risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

  Average real risk premium %  

 
Explanation:

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