Suppose we have the following Treasury bill returns and inflation rates over an eight- year period: Year Treasury Bills Inflation 123456700 8.81% 10.60% 9.66 14.18 7.42 8.59 6.52 6.21 7.00 8.35 9.29 10.77 12.11 14.92 8 13.85 14.60 a. Calculate the arithmetic average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Treasury bills Inflation Average return % % b. Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation Treasury bills Inflation % % c. What is the average real return for Treasury bills over this period? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Average real return %
Suppose we have the following Treasury bill returns and inflation rates over an eight- year period: Year Treasury Bills Inflation 123456700 8.81% 10.60% 9.66 14.18 7.42 8.59 6.52 6.21 7.00 8.35 9.29 10.77 12.11 14.92 8 13.85 14.60 a. Calculate the arithmetic average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Treasury bills Inflation Average return % % b. Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Standard deviation Treasury bills Inflation % % c. What is the average real return for Treasury bills over this period? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Average real return %
Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates
Section: Chapter Questions
Problem 2IEE
Question
![Suppose we have the following Treasury bill returns and inflation rates over an eight-
year period:
Year Treasury Bills
Inflation
123456700
8.81%
10.60%
9.66
14.18
7.42
8.59
6.52
6.21
7.00
8.35
9.29
10.77
12.11
14.92
8
13.85
14.60
a. Calculate the arithmetic average return for Treasury bills and the average annual
inflation rate (consumer price index) for this period. (Do not round intermediate
calculations and enter your answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
Treasury bills
Inflation
Average return
%
%
b. Calculate the standard deviation of Treasury bill returns and inflation over this period.
(Do not round intermediate calculations and enter your answers as a percent
rounded to 2 decimal places, e.g., 32.16.)
Standard deviation
Treasury bills
Inflation
%
%
c. What is the average real return for Treasury bills over this period? (A negative answer
should be indicated by a minus sign. Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Average real return
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F902e7e06-dd9d-47fe-961b-7a721406cdf1%2F41d294ce-dc32-42c8-a850-48d1e94e3f06%2Flaqlh68_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose we have the following Treasury bill returns and inflation rates over an eight-
year period:
Year Treasury Bills
Inflation
123456700
8.81%
10.60%
9.66
14.18
7.42
8.59
6.52
6.21
7.00
8.35
9.29
10.77
12.11
14.92
8
13.85
14.60
a. Calculate the arithmetic average return for Treasury bills and the average annual
inflation rate (consumer price index) for this period. (Do not round intermediate
calculations and enter your answers as a percent rounded to 2 decimal places, e.g.,
32.16.)
Treasury bills
Inflation
Average return
%
%
b. Calculate the standard deviation of Treasury bill returns and inflation over this period.
(Do not round intermediate calculations and enter your answers as a percent
rounded to 2 decimal places, e.g., 32.16.)
Standard deviation
Treasury bills
Inflation
%
%
c. What is the average real return for Treasury bills over this period? (A negative answer
should be indicated by a minus sign. Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Average real return
%
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you