Refer to the following table: Year T-bill return Inflation 1 7.99% 12.34% 2 5.87

Question

Refer to the following table:

Year T-bill return Inflation
1 7.99% 12.34%
2 5.87 6.94
3 5.07 4.86
4 5.45 6.70
5 7.64 9.02
6 10.56 13.29
7 12.10 12.52
8 14.60 8.92

A)

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.

Average Treasury bill return %
Average inflation %

B)

Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not include the percent signs (%). Round your answers to 2 decimal places.

Standard deviation
T-bills %
Inflation %

C)

Calculate the average real return for Treasury bills over this period. Round your answer to 2 decimal places. (e.g., 32.16))

Average real return %

Explanation / Answer

(a) mean = <x>= x/n
average T-bill return = 8.6600 ~ 8.66
average inflation = 9.323 ~ 9.32

(b) standard deviation = (x2)/n - <x>2

std T-bill return = 3.224 ~ 3.22

std inflation = 2.911 ~ 2.91

(c) real return = return - inflation

Tabulated real returns

average returns = -0.6637 ~ -0.66

-4.35 -1.07 0.21 -1.25 -1.38 -2.73 -0.42 5.68

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