4. Series Arithmetic Mean What was the arithmetic average annual return on large
ID: 2760643 • Letter: 4
Question
4.
Series
Arithmetic Mean
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).)
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).)
Consider the following information on large-company stocks for a period of years.Explanation / Answer
(a)
The nominal return is the stated return which is 13.9%
(b)
Using the Fishers Equation The real return is =
(1+R)= (1+r) (1+h)
r = (1.1390) / (1.033) - 1
r = 0.1026 or 10.26%
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