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:

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))

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))

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))

Suppose we have the following Treasury bill returns and inflation rates over an eight year period:

Explanation / Answer

a) Average TB rate = 74.66/8 = 9.33% Average inflation rate = 88.22/8 = 11.03% Year Treasury Bills Inflation 1 8.81 10.60 2 9.66 14.18 3 7.42 8.59 4 6.52 6.21 5 7.00 8.35 6 9.29 10.77 7 12.11 14.92 8 13.85 14.60 74.66 88.22 b) SD of Treasury Bills = (45.5128/8) = 2.39% SD of Inflation rate = (74.4204/8) = 3.05% Year Treasury Bills Deviation from mean d^2 1 8.81 -0.52 0.2704 2 9.66 0.33 0.1089 3 7.42 -1.91 3.6481 4 6.52 -2.81 7.8961 5 7.00 -2.33 5.4289 6 9.29 -0.04 0.0016 7 12.11 2.78 7.7284 8 13.85 4.52 20.4304 74.66 45.5128 Year Inflation Deviation from mean d^2 1 10.60 -0.43 0.1849 2 14.18 3.15 9.9225 3 8.59 -2.44 5.9536 4 6.21 -4.82 23.2324 5 8.35 -2.68 7.1824 6 10.77 -0.26 0.0676 7 14.92 3.89 15.1321 8 14.60 3.57 12.7449 88.22 74.4204 c) Average real return for Treasury bills: average real return = [(1+average treasury bill return)/(1+average inflation rate)] - 1 = (1.0933/1.1103) - 1 = -1.53%

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.