During the past year, you had a portfolio that contained U.S. government T-bills, long-term government bonds, and common stocks. The rates of return on each of them were as follows:
U.S. government T-bills .......... 5.50%
U.S. government long-term bonds ...... 7.50
U.S. common stocks ............ 11.60
During the year, the consumer price index, which measures the rate of inflation, went from 160 to 172 (1982 – 1984 = 100). Compute the rate of inflation during this year. Compute the real rates of return on each of the investments in your portfolio based on the inflation rate.

  • CreatedDecember 17, 2014
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