Average Annual Rates Standard Deviation T-Bills Inflation Real T-Bill T-Bills Inflation Real T-Bill Full sample 3.38 1.60 0.46 3.12 4.00 3.76 1927-1951 0.95 1.79 -0.47 1.24 6.04 6.33 1952-2021 4.26 3.46 0.81 3.13 2.89 2.12 Market Big/ Big/ Small/ Small/ (1927-2021) Mean excess return (annualized) Standard deviation (annualized) Index 8.29 18.52 Growth Value Growth Value 8.07 11.69 8.99 15.38 18.35 24.70 26.06 28.21 Suppose that the inflation rate is expected to be 1.60% in the near future using the historical data provided in Table 5.3 and Table 5.5, what would be your predictions for the following? Note: Round your answers to 2 decimal places. a. The T-bill rate? b. The expected rate of return on the Big/Value portfolio? c. The risk premium on the stock market? % % Remains unchanged
Average Annual Rates Standard Deviation T-Bills Inflation Real T-Bill T-Bills Inflation Real T-Bill Full sample 3.38 1.60 0.46 3.12 4.00 3.76 1927-1951 0.95 1.79 -0.47 1.24 6.04 6.33 1952-2021 4.26 3.46 0.81 3.13 2.89 2.12 Market Big/ Big/ Small/ Small/ (1927-2021) Mean excess return (annualized) Standard deviation (annualized) Index 8.29 18.52 Growth Value Growth Value 8.07 11.69 8.99 15.38 18.35 24.70 26.06 28.21 Suppose that the inflation rate is expected to be 1.60% in the near future using the historical data provided in Table 5.3 and Table 5.5, what would be your predictions for the following? Note: Round your answers to 2 decimal places. a. The T-bill rate? b. The expected rate of return on the Big/Value portfolio? c. The risk premium on the stock market? % % Remains unchanged
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Question
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