Problem 10-5 Nominal versus Real Returns [LO 2] Series Arithmetic Mean What was

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Question

Problem 10-5 Nominal versus Real Returns [LO 2]

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

Nominal return = 12.7 + 16.4 + 6.2 + 6.1 +5.6 + 3.8 / 6 = 8.47%

Real return = nominal return - inflation rate

= 8.47% - 3.3% = 5.17%.

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Problem 10-5 Nominal versus Real Returns [LO 2] Series Arithmetic Mean What was

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Explanation / Answer

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