connect. FINANCE apter 12& 13 Assignment Question 3 (of 15) 3. value 10.00 point

Question

connect. FINANCE apter 12& 13 Assignment Question 3 (of 15) 3. value 10.00 points You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 3 percent, 9 percent, 29 percent, 17 percent, and 12 percent. The average inflation rate over this period was 3.1 percent and the average T-bill rate was 3.6 percent. What was the average real return on Crash-n-Burn's stock? (Do not round intermediate calculations.) (Click to select) Requirement 2 What was the average nominal risk premium on Crash-n-Burn's stock? (Do not round intermediate calculations.) Click to selectn eBook & Resources aBook: 12.3.Average Returns The Fitst esso MacBook Air esc F2

Explanation / Answer

We need to first find average return of last 5 years =(3-9+29+17+12)/5 10.4 % 1 Average real return= average return-inflation=10.4%-3.1%=7.3% 2 Average nominal risk premium= average return- T bill rate=10.4%-3.6%= 6.8%

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