The following table shows the nominal returns on the U.S. stocks and the rate of inflation.
a. What was the standard deviation of the market returns?
b. Calculate the average real return.
Year | Nominal Return (%) | Inflation (%) |
2004 | + 12.5 | +3.3 |
2005 | +6.4 | +3.4 |
2006 | + 15.8 | +2.5 |
2007 | +5.6 | +4.1 |
2008 | −37.2 | +0.1 |
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