Refer to Table 10.1 in the text and look at the period from 1973 through 1980.
a. Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period.
b. Calculate the standard deviation of Treasury bill returns and inflation over this time period.
c. Calculate the real return for each year. What is the average real return for Treasury bills?
d. Many people consider Treasury bills to be risk-free. What do these calculations tell you about the potential risks of Treasury bills?
Table 10.1

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LARGE-COMPANY STOCKS LONG-TERM GOVERNMENT BONDS U.S. TREASURY CONSUMER YEAR BILLS PRICE INDEX 1.70 1.61 2.68 3.39 1.55 2.38 1.88 1997 1998 1999 33.36 28.58 21.04 一9.10 11.89 -22.10 28.68 10.88 4.91 15.79 5.49 -37.00 26.46 17.70 19.22 -1276 22.16 5.30 14.08 1.62 10.34 10.35 0.28 10.85 19.24 一9.49 5.19 4.86 4.80 5.98 3.33 1.61 1.03 1.43 3.30 4.97 4.52 1.24 0.15 2001 2002 3.42 2.54 4.08 2006 2007 2008 2009 2.72