Here are inflation rates and U.S. stock market and Treasury bill returns between 1929 and 1933:
Year | Inflation | Stock Market Return | T-Bill Return |
1929 | -.2 | -14.5 | 4.8 |
1930 | -6.0 | -28.3 | 2.4 |
1931 | -9.5 | -43.9 | 1.1 |
1932 | -10.3 | -9.9 | 1.0 |
1933 | .5 | 57.3 | .3 |
a. What was the real return on the stock market in each year?
b What was the average real return?
c. What was the risk premium in each year?
d. What was the average risk premium?
e. What was the standard deviation of the risk premium?
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