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4) (4 pts) Given the average return on the following Investments over the last 50 years: Large Company Stocks Long-term Corporate Bonds Long term Government Bonds US Treasury Bills Inflation 50 year average 50 year average = 6.2% 50 year average 5.7% 50 year average: 3.5% 50 year average: 2.2% 9.4% What was the average historical risk premium for Large Company Stocks over the last 50 years? 8 What was the average historical real rate of return for Large Company Stocks over the last 50 years?
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Answer #1

formula used :

risk premium = 50 year average return - 50 years average of US Treasury Bill return

real rate = ((1+50 year average return)/(1+inflation rate))-1

9.40% 6.20% 5.70% 3.50% 2.20% large company stocks 2 50 year average 50 year average 50 year average 50 year average 50 year average long-term corporate bonds long term government bonds 4 Ц US treasury Bills 5 Inflation 3 8 risk premium 9 2 10 historical real rate of return 5.90% 7.05%

1 large company stocks 2 long-term corporate bonds 3 long term government bonds 4 US treasury Bills 5 Inflation 50 year average 50 year average 50 year average 50 year average 50 year average 0.094 0.062 0.057 0.035 0.022 8 risk premium 9 2) 10 historical real rate of return -C1-C4

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