Suppose we have the following Treasury bill returns and inflation rates over an
ID: 2382420 • Letter: S
Question
Suppose we have the following Treasury bill returns and inflation rates over an eight year period:
Year
Treasury Bills
Inflation
1
10.15
12.25
2
11.05
15.67
3
8.76
9.98
4
8.05
7.69
5
8.58
9.98
6
10.92
12.45
7
13.79
16.65
8
15.63
16.55
A) Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Round your answers to 2 decimal places. (e.g., 32.16))
Average Return for Treasury bills is
Average Return for Inflation is
B) Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
Standard deviation for Treasury bills is
Standard deviation for Inflation is
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 and round your final answer to 2 decimal places. (e.g., 32.16))
The average real return for Treasury bills is
B) Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
Standard deviation for Treasury bills is
Standard deviation for Inflation is
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 and round your final answer to 2 decimal places. (e.g., 32.16))
The average real return for Treasury bills is
Suppose we have the following Treasury bill returns and inflation rates over an eight year period:
Year
Treasury Bills
Inflation
1
10.15
12.25
2
11.05
15.67
3
8.76
9.98
4
8.05
7.69
5
8.58
9.98
6
10.92
12.45
7
13.79
16.65
8
15.63
16.55
A) Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Round your answers to 2 decimal places. (e.g., 32.16))
Average Return for Treasury bills is
Average Return for Inflation is
B) Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
Standard deviation for Treasury bills is
Standard deviation for Inflation is
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 and round your final answer to 2 decimal places. (e.g., 32.16))
The average real return for Treasury bills is
Explanation / Answer
A) Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Round your answers to 2 decimal places. (e.g., 32.16))
Average Return for Treasury bills = (10.15+11.05+8.76+8.05+8.58+10.92+13.79+15.63)/8
Average Return for Treasury bills = 10.87%
Average Return for Inflation = (12.25+15.67+9.98+7.69+9.98+12.45+16.65+16.55)/8
Average Return for Inflation = 12.65%
B) Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
Answer
Standard deviation for Treasury bills is 2.66%
Standard deviation for Inflation is 3.37%
Working
Standard deviation for Treasury bills = (49.39/(8-1))^(1/2)
Standard deviation for Treasury bills = 2.66%
Standard deviation for Inflation = (79.39/(8-1))^(1/2)
Standard deviation for Inflation =3.37%
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 and round your final answer to 2 decimal places. (e.g., 32.16))
The average real return for Treasury bills = (1+Average Return for Treasury bills )/(1+Average Return for Inflation) - 1
The average real return for Treasury bills = (1+10.87%)/(1+12.65%) - 1
The average real return for Treasury bills = - 1.58%
Year Treasury Bills (a-average)^2 Inflation (c-average)^2 [a] [b] [c] [d] 1 10.15 0.51 12.25 0.16 2 11.05 0.03 15.67 9.11 3 8.76 4.44 9.98 7.14 4 8.05 7.93 7.69 24.63 5 8.58 5.23 9.98 7.14 6 10.92 0.00 12.45 0.04 7 13.79 8.55 16.65 15.98 8 15.63 22.69 16.55 15.19 Sum= 86.93 49.39 101.22 79.39 Average = sum/8 10.87 12.65Related Questions
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