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Over the past four years, large-company stocks and U.S. Treasury bills have produced the returns stated below. During this period, inflation averaged 2.8 percent. Given this information, the average real rate of return on large-company stocks was ___ percent as compared to _____ percent for Treasury bills.

Respuesta :

Answer:

7.98; 0.92

Explanation:

First we calculate the rate of return on large company stock as follows:

Average nominal return = (0.15 + 0.07 + 0.04 + 0.18)/4 = 0.11

Average real rate: r = (1.11/1.028) - 1 = 7.98 percent

Now we solve the percent for U.S. Treasury Bills

Average nominal return = (0.06 + 0.03 + 0.02 + 0.04)/4 = 0.0375

Average real rate: r = (1.0375/1.028) - 1 = 0.92 percent

Hence, the answer is 7.98% for large-company stocks and 0.92% for Treasury Bills.

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