Consider the following information on large-company stocks for a period of years

Question

Consider the following information on large-company stocks for a period of years. Required: What was the arithmetic average annual return on large-company stocks in nominal terms? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Nominal return % What was the arithmetic average annual return on large-company stocks in real terms? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Real return %

Explanation / Answer

a)

Nominal Rate = 13.10%

b)

Real Return = (1+Nominal Rate)/(1+Inflation rate) -1

Real Return = (1+13.1%)/(1+3.6%) -1

Real Return = 9.17%

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