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
r
ounded to 2 decimal places (e.g., 32.16).)

   Average real return for Treasury bills %

Solutions

Expert Solution


Related 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...
Consider the following rates of return: Year / Large Company Stocks / US Treasury Bill 1...
Consider the following rates of return: Year / Large Company Stocks / US Treasury Bill 1 3.99 % 4.59 % 2 14.16 4.94 3 19.25 3.86 4 –14.43 6.99 5 –31.92 5.30 6 37.49 6.20 a. Calculate the arithmetic average returns for large-company stocks and T-bills over this period. b. Calculate the standard deviation of the returns for large-company stocks and T-bills over this period. c-1 Calculate the observed risk premium in each year for the large-company stocks versus the...
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?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT