Question 6 (of i) EXI 6. value: 2.00 points You\'ve observed the following retur

Question

Question 6 (of i) EXI 6. value: 2.00 points You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 14 percent, -9 percent, 16 percent, 21 percent, and 3 percent. Suppose the average inflation rate over this period was 3.5 percent and the average T-bill rate over the period was 4.2 percent. a. What was the average real return on Crash-n-Burn's stock? (Round your answer to 2 decimal places (e.g., 32.16) Average real return b. What was the average nominal risk premium on Crash-n-Burn's stock? (Round your answer to 1 decimal place. (e.g., 32.1) Average nominal risk % Hints References eBook&Resources; Hint #1

Explanation / Answer

average noinal return = (14 - 9 + 16 + 21 + 3)/5 = 9.00%

average real return = 9.00% - 3.50% = 5.50%

average risk premium = 9.00% - 4.20% = 4.80%

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