Question

Table 12.1

Year	Large Company Stock	Long-Term Government Bonds	US Treasury Bills	Consumer Price Index
1973	-14.69	3.30	7.29	8.71
1974	-26.47	4.00	7.99	12.34
1975	37.23	5.52	5.87	6.94
1976	23.93	15.56	5.07	4.86
1977	-7.16	0.38	5.45	6.70
1978	6.57	-1.26	7.64	9.02
1979	18.61	-2.76	10.56	13.29
1980	32.50	-2.48	12.10	12.52

Refer to Table 12.1 and look at the period from 1973 through 1980.

1. Calculate the average return for Treasury bills and the average annual inflation rate for this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

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.)

c.            What was 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.)

a	Treasury Bills		%
	Inflation		%
b	Treasury Bills		%
	Inflation		%
c	Average real return		%

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Note - Consumer price index commonly known as Inflation.

Hope this will help, please do comment if you need any further explanation. Your feedback would be appreciated.