Question

Suppose that the inflation rate is expected to be 3% in the near future. Using the...

Suppose that the inflation rate is expected to be 3% in the near future. Using the historical data provided in this chapter, what would be your predictions for:

a.  The T-bill rate?

b.  The expected rate of return on the Big/Value portfolio?

c.  The risk premium on the stock market?

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Answer #1

I can not answer this question as I don't have the historical data as mentioned in the question but I can tell you how you can do this on your own..

(a)

(b)

(c) The risk premium on the market is the difference between the expected return on the market and the risk free rate of return or T-bill rate of return.

Feel free to revert in case of any problem..

I hope this helps,,.

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