Consider the following information for a period of years: Series Arithmetic Mean

Question

Consider the following information for a period of years: Series Arithmetic Mean Long-term corporate bonds 7.1 % Long-term government bonds 7.0 Inflation 4.0 What is the real return on long-term government bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Real return % What is the real return on long-term corporate bonds? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Real return %

Explanation / Answer

Real return on long-term government bonds 2.88% (1+7%)/(1+4%)-1 Real return on long-term corporate bonds 2.98% (1+7.1%)/(1+4%)-1

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