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

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The following table shows the nominal returns on the US stocks and the rate of inflation. Nominal Year 2004 +12.5 Return (%) Inflation (%) +3.3 2005 +6.4 +3.4 2006 +15.8 +2.5 2007 +5.6 +4.1 2008-37.2 +0.1 Part a: What is the standard deviation of the market returns? Part b: Calculate the average (or expected value) real return. The following table shows the nominal returns on the US stocks and the rate of inflation. Nominal Year 2004 +12.5 Return (%) Inflation (%) +3.3 2005 +6.4 +3.4 2006 +15.8 +2.5 2007 +5.6 +4.1 2008-37.2 +0.1 Part a: What is the standard deviation of the market returns? Part b: Calculate the average (or expected value) real return.

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To calculate the standard deviation of market returns and the average real return we need to adjust ... View the full answer