Suppose we have the following Treasury bill returns and inflation rates over an

Question

Suppose we have the following Treasury bill returns and inflation rates over an eight year period: Year Treasury Bills Inflation 1 9.87% 11.87% 2 10.76 15.36 3 8.48 9.69 4 7.78 7.43 5 8.30 9.69 6 10.63 12.15 7 13.49 16.34 8 15.31 16.22 a. Calculate the average return for Treasury bills and the average annual inflation rate for this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Treasury bills % Inflation % b. Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Treasury bills % Inflation % c. What was the average real return for Treasury bills over this period? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Average real return % ReferenceseBook & Resources

Explanation / Answer

T-bill Inflation Real Return 9.87% 11.87% -1.79% 10.76% 15.36% -3.99% 8.48% 9.69% -1.10% 7.78% 7.43% 0.33% 8.30% 9.69% -1.27% 10.63% 12.15% -1.36% 13.49% 16.34% -2.45% 15.31% 16.22% -0.78% Average Return 10.58% 12.34% -1.55% Variance 0.061% 0.098% 0.014% Standard deviation 2.471% 3.134% 1.185% Real Return is (T bill rate / Inflation)- 1

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