Suppose we have the following Treasury bill returns and inflation rates over an eight year period:
| Year |
Treasury Bills |
Inflation |
| 1 |
7.55% |
9.02% |
| 2 |
8.29 |
12.69 |
| 3 |
6.15 |
7.24 |
| 4 |
5.43 |
5.20 |
| 5 |
5.83 |
7.10 |
| 6 |
8.04 |
9.44 |
| 7 |
11.00 |
13.72 |
| 8 |
12.58 |
13.05 |
|
a. Calculate the average return for Treasury bills and the average annual inflation rate for this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Treasury bills 8.11 %
Inflation 9.68 %
b. Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Treasury bills 2.53 %
Inflation 3.16 %
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. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Average real return %