Question
In: Finance
Consider the following table for an eight-year period: Year T-bill return Inflation Year 1 7.36% ...
| Consider the following table for an eight-year period: |
| Year | T-bill return | Inflation |
| Year 1 | 7.36% | 8.64% |
| Year 2 | 8.39 | 12.27 |
| Year 3 | 5.94 | 6.87 |
| Year 4 | 5.42 | 4.93 |
| Year 5 | 5.52 | 6.63 |
| Year 6 | 7.99 | 8.95 |
| Year 7 | 10.63 | 13.22 |
| Year 8 | 12.45 | 12.45 |
| Requirement 1: |
|
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).) |
| Average return for Treasury bills | % |
| Average annual inflation rate | % |
| Requirement 2: |
|
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).) |
| Standard deviation of Treasury bills | % |
| Standard deviation of inflation | % |
| Requirement 3: |
| (a) |
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).) |
| Year | Real return |
| Year 1 | % |
| Year 2 | % |
| Year 3 | % |
| Year 4 | % |
| Year 5 | % |
| Year 6 | % |
| Year 7 | % |
| Year 8 | % |
| (b) |
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 |
| Average real return for Treasury bills | % |
Solutions
jeff jeffy answered 8 months agoRelated Solutions
Consider the following table for an eight-year period: Year T-bill return Inflation 1 7.31 % 8.69...
Consider the following table for an eight-year period:
Year
T-bill return
Inflation
1
7.31
%
8.69
%
2
8.14
12.32
3
5.89
6.92
4
5.17
4.88
5
5.47
6.68
6
7.74
9.00
7
10.58
13.27
8
12.20
12.50
Calculate the 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.)
Average return
for...
Consider the following table for an eight-year period: Year T-bill return Inflation 1 7.40 % 8.60...
Consider the following table for an eight-year period:
Year
T-bill return
Inflation
1
7.40
%
8.60
%
2
8.59
12.23
3
5.98
6.83
4
5.62
4.97
5
5.56
6.59
6
8.19
8.91
7
10.67
13.18
8
12.65
12.41
Calculate the 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.)
Average return for Treasury...
Year T-bill return Inflation 1 7.36% 8.64% 2 8.39 12.27
Year
T-bill return
Inflation
1
7.36%
8.64%
2
8.39
12.27
3
5.94
6.87
4
5.42
4.93
5
5.52
6.63
6
7.99
8.95
7
10.63
13.22
8
12.45
12.45
Calculate the standard deviation of Treasury bill returns and
inflation over this time period. (Do not round intermediate
calculations and enter your answers as a percent rounded to 2
decimal places, e.g., 32.16.)
Suppose we have the following Treasury bill returns and inflation rates over an eight-year period: Year...
Suppose we have the following Treasury bill returns and
inflation rates over an eight-year period:
Year
Treasury Bills
Inflation
1
8.11%
9.83%
2
8.92
13.36
3
6.74
7.87
4
5.88
5.61
5
6.32
7.63
6
8.57
10.01
7
11.55
14.32
8
13.21
13.77
a.
Calculate the average return for Treasury bills and the average
annual inflation rate...
Suppose we have the following Treasury bill returns and inflation rates over an eight year period:...
Suppose we have the following Treasury bill returns and
inflation rates over an eight year period:
Year
Treasury
Bills
Inflation
1
9.23%
11.07%
2
10.10
14.66
3
7.84
9.03
4
6.92
6.59
5
7.42
8.79
6
9.73
11.23
7
12.57
15.40
8
14.35
15.20
a.
Calculate the average return for Treasury bills and the average
annual inflation...
Suppose we have the following Treasury bill returns and inflation rates over an eight year period:...
Suppose we have the following Treasury bill returns and
inflation rates over an eight year period:
Year
Treasury
Bills
Inflation
1
7.37%
8.79%
2
8.07
12.42
3
5.95
7.02
4
5.15
4.94
5
5.53
6.78
6
7.72
9.10
7
10.64
13.37
8
12.18
12.60
Calculate the standard deviation of Treasury bill returns and
inflation over this period. (Do...
1-The real interest rate is 0.21%, a 1-year T-Bill rate is 1.09% and the 2 year T-Note rate is 1.36% with no MRP. What is the inflation expected the year after next?
1-The real interest rate is 0.21%, a 1-year T-Bill rate is 1.09% and the 2 year T-Note rate is 1.36% with no MRP. What is the inflation expected the year after next?
2-If you purchase a 20-year T-bond, which of the following sources of risk are you most concerned about?
A)The possibility that you will not be able to resell the T-bond.
B)The possibility that the bond's MRP will be zero
C)The possibility that the issuer will default on...
13) Consider a Treasury bill with a rate of return of 5% and the following risky...
13)
Consider a Treasury bill with a rate of return of 5% and the
following risky securities:
Security A: E(r) = .15; variance = .0400
Security B: E(r) = .10; variance = .0225
Security C: E(r) = .12; variance = .1000
Security D: E(r) = .13; variance = .0625
The investor must develop a complete portfolio by combining the
risk-free asset with one of the securities mentioned above. The
security the investor should choose as part of her complete
portfolio...
Suppose that a financial analyst collected the following data: rate of return on T-bill is 2.5%...
Suppose that a financial analyst collected the following data:
rate of return on T-bill is 2.5%
Market risk premium is = 5%; company's beta is 0.7;
D1 = $2.00; current stock price is
$30.00; future growth of dividends is 6%.
What estimate should the analyst use?
Suppose that a financial analyst collected the following data: rate of return on T-bill is 2.5%...
Suppose that a financial analyst collected the following data:
rate of return on T-bill is 2.5%
Market risk premium is = 5%; company's beta is 0.7;
D1 = $2.00; current stock price is
$30.00; future growth of dividends is 6%.
a. What is this firm’s cost of equity using the DCF
approach?
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