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. Series Arithmetic Mean Large-company stocks 15.5 % Small-company stocks 16.4 Long-term corporate bonds 6.2 Long-term government bonds 6.1 Intermediate-term government bonds 5.6 U.S. Treasury bills 3.8 Inflation 3.6

Required: (a) 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)

(b) 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)

Explanation / Answer

Answer

Answer (a)

Answer : The arithmetic average annual return on large-company stocks in nominal terms was 15.5 %

Answer (b)

Answer : The arithmetic average annual return on large-company stocks in real terms was 11.9% ( 15.5 % - 3.6%).

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