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The following return series comes from Global Financial Data. Year    Large Stocks    LT Gov...

The following return series comes from Global Financial Data.

Year    Large Stocks    LT Gov Bonds    US T-bills CPI
2014 13.69% 24.71% 0.02% 0.76%
2015 1.38% 0.65% 0.02% 0.73%
2016 11.96% 1.75% 0.20% 2.07%
2017 21.83% 6.24% 0.80% 2.11%
2018 -4.38% -0.57% 1.81% 1.91%

Calculate the average nominal return earned on large-company stocks. (Enter percentages as decimals and round to 4 decimals)

Calculate the average real return earned on large-company stocks. (Enter percentages as decimals and round to 4 decimals)

Calculate the average risk premium earned on large company stocks. (Enter percentages as decimals and round to 4 decimals)

Calculate the average real risk premium earned on large-company stocks. (Enter percentages as decimals and round to 4 decimals)

Calculate the average risk premium earned on US Tbills. (Enter percentages as decimals and round to 4 decimals)

Calculate the average rate of inflation. (Enter percentages as decimals and round to 4 decimals)

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Answer #1
Year Large LT Gov US T-bill CPI
2014 13.69% 24.71% 0.02% 0.76%
2015 1.38% 0.65% 0.02% 0.73%
2016 11.96% 1.75% 0.20% 2.07%
2017 21.83% 6.24% 0.80% 2.11%
2018 -4.38% -0.57% 1.81% 1.91%
Average 8.8960% 6.5560% 0.5700% 1.5160%

Average can be calculated using mathematical formula of summing all values and dividing by 5.

Average Nominal Return = 8.8960%

Average Real Rate = Average Large Cap - Average CPI = 8.8960% - 1.5160% = 7.3800%

Average Real Risk Premium = Average Real Rate - Average T-bill = 7.38% - 0.57% = 6.8100%

Average risk premium = 8.8960% - 0.57% = 8.3260%

Average inflation = 1.5160%

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