You invested in long-term corporate bonds and earned 6.8 percent.During that same time period,large-company stocks returned 12.6 percent,long-term government bonds returned 6.4 percent,U.S.Treasury bills returned 4.2 percent,and inflation averaged 3.8 percent.What excess return did you earn?
A)2.6 percent
B)2.3 percent
C)1.3 percent
D).4 percent
E)3.0 percent

Question

Quizplus · Accepted Answer

The excess return is calculated by subtracting the inflation rate from the return on the investment. The return on long-term corporate bonds is 6.8 percent, and the inflation rate is 3.8 percent. Therefore, the excess return is 6.8% - 3.8% = 3.0%.

You Invested in Long-Term Corporate Bonds and Earned 6