Look at Table 10.1 and Figure 10.7 in the text. When were T-bill rates at their highest over the period from 1926 through 2008? Why do you think they were so high during this period? What relationship underlies your answer?

Figure 10.7

Transcribed Image Text:

Long-term government bonds 50 40 30 10 -10 1925 1935 1945 1955 1975 1995 2008 1965 1985 Year-end Total annual returns (in percent) 20 TABLE 10.1 Year-to-year total returns: 1926–2008 Large-Company Stocks Long-Term Government Bonds U.S. Treasury Consumer Bills Price Index Year Large-Company Stocks Long-Term Government Bonds U.S. Treasury Bills Consumer Price Index Year 7.90% -1,12% -2.20 -1.16 0.58 -6.40 -9.32 -10.27 0.76 1.52 2.00 1.45 1926 3.30% 3.15 4.05 1968 5.30% -7.45 12.24 12.67 9.15 4.72% 11,14% 37.13 43.31 8.91 11.00% -8.47 3.94 14.30 18.99 -14.69 -26.47 37.23 23.93 -7.16 6.57 18.61 32.50 4.92 21.55 5.49% 6.90 6.50 4.36 4.23 729 7.99 5.87 5.07 5.45 7.64 1927 1928 1929 1930 1931 1932 1933 10.36 -1,37 5.23 5.80 -8.04 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 6.20 5.57 3.27 4.47 227 1.15 0.88 0.52 0.27 0.17 0.17 0.27 25.26 -43.86 -8.85 52.88 3.41 8.71 12.34 6.94 4.86 6.70 9.02 13.29 -12.68 -3.28 4.67 18.34 2.31 -2.07 -2.76 -5.91 -0.16 49.90 -2.11 16.53 39.00 32.51 14.11 0.31 12.98 5.88 8.22 -0.13 6.26 5.71 10.34 -8.66 2.67 2.50 1934 -2.34 1935 1936 47.22 32.80 -35.26 33.20 -0.91 -10.08 -11.77 21.07 25.76 1937 1938 1939 1940 2.86 -2.78 0.00 0.71 10.56 12.10 14.60 10.94 8.99 12.52 8.92 3.83 3.79 3.95 3.80 0.06 0.04 0.04 0.14 0.34 0.38 0.38 0.38 0.38 0.62 1941 1942 1943 9.93 9.03 2.96 1982 1983 1984 1985 22.56 6.27 31.73 18.67 5.25 16.61 31.69 3.10 30.46 7.62 10.08 1.32 37.58 22.96 33.36 28.58 21.04 -9.10 -11.89 -22.10 28.68 10.88 4.91 15.79 5.49 -37.00 9.90 1944 1945 1946 1947 1948 1949 1950 7.71 6.09 5.88 6.94 8.44 7.09 5,43 3.48 3.03 4.39 5.61 19.09 2.88 5.17 4.07 -1.15 2 10 7.02 -1.44 -3.53 1.82 -0.88 7.89 -1.03 3.14 5.25 2.30 2.25 18.13 8.84 2.99 -2.07 5.93 6.00 0.75 0.75 1986 1987 1988 1989 1.10 4,43 4.42 4.65 6.11 3.06 2.90 36.46 -8.18 524 5.10 18.06 30.58 24.55 18.50 -1.10 1.06 1.12 1.22 1.56 1,75 1.87 0.93 1990 1991 1992 1993 1994 1995 1996 -8.09 8.71 22.15 5.44 20.04 8.00 2232 -11.46 37.28 -2.59 17.70 19.22 1951 1952 1953 1954 2.75 2.67 2.54 3.32 1.70 52.40 31.43 6.63 -10.85 -0.74 0.37 2.99 2.90 5.14 1955 1956 1957 1.80 2.66 3.28 1997 1998 1999 5.19 4.86 4.80 1.61 2.68 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 43,34 11.90 0.48 26.81 -8.78 22.69 16.36 12.36 -10.10 23.94 -12.76 22.16 5.30 14.08 1.62 10.34 10.35 0.28 10.85 39.46 -6.70 -1,35 7.74 1.71 3.48 281 2.40 2.82 3.23 3.62 4.06 4.94 4.39 1.76 1.73 1,36 2000 2001 2002 2003 2004 2005 2006 2007 2008 5.98 3.33 1.61 1.03 3.02 4.63 1.37 4.43 1.40 -1.61 -6.38 0.67 1.33 1.64 0.97 1.92 3,46 3.39 1.55 2.38 1.88 3.26 3.42 2.54 4.08 0.09 143 3.30 4.97 4.52 124 3.04