Question

9. 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

1. What was the arithmetic average return on the stock over this five-year period?

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

10. 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?

Answer 1