Computation of real rate of return
You are given the following long-run annual rates of return for alternative investment instruments:
| U.S. Government T-bills | 3.50% |
| Large-cap common stock | 11.75 |
| Long-term corporate bonds | 5.50 |
| Long-term government bonds | 4.90 |
| Small-capitalization common stock | 13.10 |
The annual rate of inflation during this period was 3 percent. Compute the real rate of return on these investment alternatives.
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