Hi. Can anyone please help with this? No one has gotten it correct yet. Thank yo

Question

Hi. Can anyone please help with this? No one has gotten it correct yet. Thank you!

You've observed the following returns on Doyscher Corporation's stock over the past five years: -25.5 percent, 14.0 percent, 31.0 percent, 2.5 percent, and 21.5 percent. The average inflation rate over this period was 3.25 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? Average real return % (b) What was the average nominal risk premium on the stock? Average nominal risk premium %

Explanation / Answer

(a) The average real rate of return on the stock will be 1 + Nominal Rate - 1 1 + Inflation Rate 1.02% (b) The average return on the stock, based on the information given is 8.70% Hence, the average nominal risk premium on the stock will be 7.68%

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