Question: Calculating Real Rates. Given the information in Problem II, what was the average real risk-free rate over this time period? What was the average real risk premium?

Problem II: Calculating Real Returns and Risk Premiums. For Problem 9, suppose the average inflation rate over this period was 3.2 percent and the average T-bill rate over the period was 4.3 percent.

a. What was the average real return on the stock?

b. What was the average nominal risk premium on the stock?

Problem I: Calculating Returns and Variability. You've observed the following returns on Barnett Corporation's stock over the past five years: -12 percent, 23 percent, 18 percent, 7 percent, and 13 percent.

a. What was the arithmetic average return on the stock over this fiveyear period?

b. What was the variance of the returns over this period? The standard deviation?