Series Arithmetic Mean What was the arithmetic average annual return on large-co

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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).)

Explanation / Answer

The arithmetic average annual return on large-company stocks in nominal terms is the stated return = 12.1%

The arithmetic average annual return on large-company stocks in real terms =>

R = [(1+R)/ (1+I) ]-1

=> [(1+12.1%) (1+3.4%) ]-1

=> (1.121/1.034) - 1

=> 8.4%

Real Return = 8.4%

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