9 value: 5.00 points Consider the following table for an eight-year period: Year

Question

9 value: 5.00 points Consider the following table for an eight-year period: Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Inflation 8.65% 12.28 6.88 4.92 6.64 8.96 13.23 12.46 T-bill return 8.34 5.93 5.37 5.51 7.94 10.62 12.40 Requirement 1 Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Do not include the percent signs (%). Round your answers to 2 decimal places e.g., 32.16).) Average return for Treasury bills Average annual inflation rate 7.93 % 9.25 % Requirement 2. Calculate the standard deviation of Treasury bill returns and inflation over this time period. (Do not include the percent signs (%). Round your answers to 2 decimal places e.g., 3216).) Standard deviation of Treasury bills 2.51 % Standard deviation of inflation 3.09 %

Explanation / Answer

Year T-bill return % Inflation% Real Rate of Return= Inflation- Tbill return Year 1 7.35 8.65 1.3 Year 2 8.34 12.28 3.94 Year 3 5.93 6.88 0.95 Year 4 5.37 4.92 -0.45 Year 5 5.51 6.64 1.13 Year 6 7.94 8.96 1.02 Year 7 10.62 13.23 2.61 Year 8 12.4 12.46 0.06 10.56 b. Average real rate of return = Total of Real rate of return/8 Average real rate of return = 10.56%/8 = 1.32

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