Homework Answers
Average Nominal Return = (0.05 -0.13 + 0.26 + 0.17 + 0.17)/5
Average Nominal Return = 0.104
Average Nominal Return = 10.40%
a.
Average Real Return = Average Nominal Return - Inflation Rate
Average Real Return = 0.1040 - 0.0380
Average Real Return = 6.60%
b.
Average Nominal Risk Premium = Average Nominal Return - T-bill rate
Average Nominal Risk Premium = 0.1040 - 0.050
Average Nominal Risk Premium = 5.40%
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