You've observed the following returns on Yamauchi Corporation's stock over the past five years: -27.9 percent, 15.6 percent, 34.2 percent, 3.3 percent, and 22.3 percent. The average inflation rate over this period was 3.33 percent and the average T-bill rate over the period was 4.3 percent. a. What was the average real risk-free rate over this time period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the average real risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You've observed the following returns on Yamauchi Corporation's stock over the past
five years: -27.9 percent, 15.6 percent, 34.2 percent, 3.3 percent, and 22.3 percent. The
average inflation rate over this period was 3.33 percent and the average T-bill rate over
the period was 4.3 percent.
a. What was the average real risk-free rate over this time period? (Do not round
intermediate calculations and enter your answer as a percent rounded to 2 decimal
places, e.g., 32.16.)
b. What was the average real risk premium? (Do not round intermediate calculations
and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
a.
Average real risk-free rate
b. Average real risk premium
%
%
Transcribed Image Text:You've observed the following returns on Yamauchi Corporation's stock over the past five years: -27.9 percent, 15.6 percent, 34.2 percent, 3.3 percent, and 22.3 percent. The average inflation rate over this period was 3.33 percent and the average T-bill rate over the period was 4.3 percent. a. What was the average real risk-free rate over this time period? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the average real risk premium? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Average real risk-free rate b. Average real risk premium % %
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