I just need help with part c. I have verified that the answers for a. and b. are

Question

I just need help with part c. I have verified that the answers for a. and b. are correct.

Suppose we have the following Treasury bill returns and inflation rates over an eight year period:

Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Round your answers to 2 decimal places. (e.g., 32.16))

Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

What was the average real return for Treasury bills over this period? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))

I just need help with part c. I have verified that the answers for a. and b. are correct.

Suppose we have the following Treasury bill returns and inflation rates over an eight year period:

Explanation / Answer

(1 + real)(1 + inflation) = (1 + nominal) ...rearrange:
(1 + nominal) / (1 + inflation) = (1 + real)
if your numbers are correct...
1.0272 / 1.0344 = 0.99304 < (1 + real) so...
real = 0.99304 - 1 = - 0.00696, or - 0.696% (notice the minus sign!)

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---