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The following table shows the nominal returns on U

Finance Nov 11, 2020

The following table shows the nominal returns on U.S. stocks and the rate of inflation. 

Year Nominal Return (%) Inflation (%)

2010 13.1 2.6

2011 8.3 2.8

2012 14.3 3.3

2013 6.1 4.2

2014 −43.3 .4

 a) What was the standard deviation of the nominal market returns? (Do not make the adjustment for degrees of freedom described in footnote 18.) (Use decimals, not percent, in your calculations. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b) Calculate the arithmetic average real return. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)  

 

Expert Solution

a). Standard deviation of nominal returns = 21.71%

b). Arithmetic average real return = -3.09%

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