You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 3 percent, -10 percent, 24 percent, 22 percent,

You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 3 percent, -10 percent, 24 percent, 22 percent, and 12 percent. Suppose the average inflation rate over this time period was 3.6 percent and the average T-bill rate was 4.8 percent. Based on this information, what was the average nominal risk premium?    A.  5.15 percent B.  5.40 percent C.  6.01 percent D.  6.37 percent E.  6.60 percent Average return = (0.03 - 0.10 + 0.24 + 0.22 + 0.12)/5 = 0.102 Average nominal risk premium = 0.102 - 0.048 = 5.40 percent

89.

You bought one of Great White Shark Repellant Co.'s 10 percent coupon bonds one year ago for $815. These bonds pay annual payments, have a face value of $1,000, and mature 14 years from now. Suppose you decide to sell your bonds today when the required return on the bonds is 14 percent. The inflation rate over the past year was 3.7 percent. What was your total real return on this investment?    A.  2.97 percent B.  1.75 percent C.  1.18 percent D.  3.44 percent E.  2.58 percent   Nominal return = ($759.92 - $815 + $100)/$815 = 0.0551 Real return = [(1 + 0.0551)/(1 + 0.037)] - 1 = 1.75 percent

90.

You find a certain stock that had returns of 4 percent, -5 percent, -15 percent, and 16 percent for four of the last five years. The average return of the stock for the 5-year period was 13 percent. What is the standard deviation of the stock's returns for the five-year period?    A.  21.39 percent B.  24.98 percent C.  27.16 percent D.  31.23 percent E.  34.02 percent Return for missing year: 0.04 - 0.05 - 0.15 + 0.16 + x = 0.13 × 5; x = 65 percent Std dev = √[1/(5 - 1)] [(0.04 - 0.13)2 + (-0.05 - 0.13)2 + (-0.15 - 0.13)2 + (0.16 - 0.13)2 + (0.65 - 0.13)2 = 31.23 percent