You’ve observed the following returns on Doyscher Corporation’s stock over the p

Question

You’ve observed the following returns on Doyscher Corporation’s stock over the past five years: –27.9 percent, 15.6 percent, 34.2 percent, 3.3 percent, and 22.3 percent. The average inflation rate over this period was 3.33 percent and the average T-bill rate over the period was 4.3 percent. Required: (a) What was the average real return on the stock? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Average real return .94 % (b) What was the average nominal risk premium on the stock? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Average nominal risk premium 2.77 %.

What's in bold are my answers and i got them both wrong after that i did it again and got 9.5% for real return and 23.67% for risk premium. I want to be sure is right.

Explanation / Answer

Average Nominal Return= Sum of Return / No. of Year

= 103.30/5= 20.66%

Average Inflation rate= 3.30%

a. Average Real Return= {(1+Nominal Rate)/(1+Inflation Rate)}-1

= (1.2066/1.033)-1 = .1681 = 16.81%

b. Average Nominal Risk Premium= Average Nominal Return - Average T Bill Rate

= 20.66-4.30 = 16.36%

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