Question

Consider the following information on large-company stocks for a period of years. Series Arithmetic Mean Large-company stocks 15.1 % Inflation 4.9 a. What was the arithmetic average annual return on large-company stocks in nominal terms? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Nominal return 15.1 % b. What was the arithmetic average annual return on large-company stocks in real terms? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Real return %

Answer 1

Real return = ((1+nominal return)/(1+inflation rate)-1)*100

Real return=((1+0.151)/(1+0.049)-1)*100

Real return = 9.72