Assume inflation averaged 3.2 percent during a period in which U.S.Treasury bills earned 4.3 percent.What was the average real rate of return on large-company stocks if the risk premium on those stocks was 7.4 percent for the period?
A)8.5%
B)3.2%
C).1%
D)7.5%
E)14.9%

Question

Quizplus · Accepted Answer

Nominal return on large-company stocks = 4.3% + 7.4% = 11.7%Real return on large-company stocks = 11.7% - 3.2% = 8.5%

Assume Inflation Averaged 3