A Stock Earned a Real Average Arithmetic Rate of Return

question 16

Multiple Choice

A stock earned a real average arithmetic rate of return of 5.65 percent for a 4-year period.During that period inflation averaged 3.6 percent while U.S.Treasury bills returned 4.2 percent.Assume the stock had annual nominal returns of 8 percent,13 percent and 12 percent for three of the four years.What nominal rate of return did the stock earn in the fourth year?

• A)3.25%
• B)3.65%
• C)3.26%
• D)4.00%
• E)4.25%

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