Problem 10-5 Nominal versus Real Returns [LO 2]

Consider the following information on large-company stocks for a period of years.

Series	Arithmetic Mean
Large-company stocks	12.7	%
Small-company stocks	16.4
Long-term corporate bonds	6.2
Long-term government bonds	6.1
Intermediate-term government bonds	5.6
U.S. Treasury bills	3.8
Inflation	3.3

Required:

(a)	What was the arithmetic average annual return on large-company stocks in nominal terms? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Nominal return

%

(b)	What was the arithmetic average annual return on large-company stocks in real terms? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Real return

%