Consider the following table for the period from 1973 through 1980. Year 1973 1974 1975 1976 1977 1978 1979 1980 T-bill return 6.93% 8.00 5.80 5.08 5.12 7.18 10.38 11.24 Inflation 8.80% 12.20 7.01 4.81 6.77 9.03 13.31 12.40 a. Calculate the average return for Treasury bills and the average annual Inflation rate (consumer price Index) for this period. Note: 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 time period. Note: Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. c. Calculate the real return for each year. Note: A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the average real return for Treasury bills?
Consider the following table for the period from 1973 through 1980. Year 1973 1974 1975 1976 1977 1978 1979 1980 T-bill return 6.93% 8.00 5.80 5.08 5.12 7.18 10.38 11.24 Inflation 8.80% 12.20 7.01 4.81 6.77 9.03 13.31 12.40 a. Calculate the average return for Treasury bills and the average annual Inflation rate (consumer price Index) for this period. Note: 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 time period. Note: Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. c. Calculate the real return for each year. Note: A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the average real return for Treasury bills?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:**Consider the following table for the period from 1973 through 1980.**
| Year | T-bill return | Inflation |
|------|---------------|-----------|
| 1973 | 6.93% | 8.80% |
| 1974 | 8.00% | 12.20% |
| 1975 | 5.80% | 7.01% |
| 1976 | 5.08% | 4.81% |
| 1977 | 5.12% | 6.77% |
| 1978 | 7.18% | 9.02% |
| 1979 | 10.28% | 13.31% |
| 1980 | 11.24% | 12.40% |
**Tasks:**
a. Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period.
*Note: 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 time period.
*Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.*
c. Calculate the real return for each year.
*Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.*
d. What is the average real return for Treasury bills?
*Note: 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.*
**Answer Fields:**
| a. Average return for Treasury bills | _____ % |
| Average annual inflation rate | _____ % |
| b. Standard deviation of Treasury bills| _____ % |
| Standard deviation of the inflation rate| _____ % |
| c. 1973 | _____ % |
| 1974 | _____ % |
| 1975 | _____ % |
| 1976 | _____ % |
| 1977 | _____ % |
| 1978 | _____ % |
| 197
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