Calculate the average return for Treasury bills and the average annual inflation
ID: 2758915 • Letter: C
Question
Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
Calculate the standard deviation of Treasury bill returns and inflation over this time period. (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
Calculate the real return for each year. (Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
What is the average real return for Treasury bills? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percentage
rounded to 2 decimal places (e.g., 32.16).)
Explanation / Answer
The average return and standard deviation is as shown below:
Requirement 1:
Average return for treasury bills = 8.23%
Average annual inflation rate= 9.18%
Requiremenent 1
Std. deviation for for T bill: 2.57%
Std. deviation for inflation : 3.05%
Requirement 3: The real rate is given by fischer's formula ( NR-IR)/(1+IR) * 100
For example in year 1 real rate = 0.0745-0.0855/1.0855 * 100 = -1.01%
In this manner the real returns are tabulated
Average real return for treasury bills = -0.8490% =-0.85% (negative)
Year T-bill return (%) Inflation(%) Year 1 7.45% 8.55% Year 2 8.84% 12.18% Year 3 6.03% 6.78% Year 4 5.87% 5.02% Year 5 5.61% 6.54% Year 6 8.44% 8.86% Year 7 10.72% 13.13% Year 8 12.90% 12.36% Average 8.23% 9.18% Std. deviation 2.57% 3.05%Related Questions
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