Homework Answers
| Year | Cnb |
| 1 | 8.00% |
| 2 | -15.00% |
| 3 | 19.00% |
| 4 | 31.00% |
| 5 | 21.00% |
| Average= | 12.80% |
| Where |
| Average or Mean = Sum of all observations/Count of all observations |
a
| Real return = ((1+nominal return)/(1+inflation rate)-1)*100 |
| Real return=((1+0.039)/(1+0.031)-1)*100 |
| Real return = 0.78 |
b
| Real return = ((1+nominal return)/(1+inflation rate)-1)*100 |
| Real return=((1+0.128)/(1+0.031)-1)*100 |
| Real return = 9.41 |
Risk premium = 9.41-0.78
=8.63%
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