Effects of Inflation 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 2011? Why do you think they were so high during this period? What relationship underlies your answer?

      

    

      

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Table 10.1 Year-by-Year Total Returns, 1926-2011 Large-Company Stocks Long-Term Government U.S. Treasury Bills Consumer Price Year Bonds Index 1926 1927 1928 1929 II.14% 37.13 43.31 -8.91 7.90% 10.36 -1.37 5.23 3.30% 3.15 4.05 4.47 -1.12% -2.26 -1.16 58 1930 1931 1932 -25.26 -43.86 -8.85 52.88 5.80 -8.04 14.11 2.27 L.15 -6.40 -9.32 -10.27 .88 31 12.98 5.88 8.22 1933 .52 1934 1935 1936 -2.34 47.22 32.80 .27 .17 .17 76 1.52 2.99 1937 1938 1939 1940 - 35.26 33.20 -91 - 10.08 -11.77 21.07 25.76 1.45 2.86 -2.78 .00 -.13 6.26 5.71 10.34 .27 .06 .04 .04 1941 1942 1943 -8.66 2.67 2.50 .14 .34 .38 .71 9.93 9.03 2.96 1944 1945 1946 1947 19.69 36.46 -8.18 5.24 2.88 5.17 38 .38 .38 .62 2.30 2.25 18.13 4.07 -1.15 1948 1949 1950 1951 5.10 18.06 30.58 24.55 8.84 2.99 -2.07 5.93 2.10 7.02 1.06 1.12 1.22 1.56 -1.44 -3.53 1952 1953 1954 18.50 - 1.10 52.40 1.82 - 88 7.89 1.75 1.87 .93 6.00 .75 .75 1955 1956 31.43 6.63 - 1.03 -3.14 1.80 2.66 -.74 37 2.99 Table 10.1 Year-by-Year Total Returns, 1926-2011 Large-Company Stocks Long-Term Government U.S. Treasury Bills Consumer Price Year Bonds Index 1926 1927 1928 1929 II.14% 37.13 43.31 -8.91 7.90% 10.36 -1.37 5.23 3.30% 3.15 4.05 4.47 -1.12% -2.26 -1.16 58 1930 1931 1932 -25.26 -43.86 -8.85 52.88 5.80 -8.04 14.11 2.27 L.15 -6.40 -9.32 -10.27 .88 31 12.98 5.88 8.22 1933 .52 1934 1935 1936 -2.34 47.22 32.80 .27 .17 .17 76 1.52 2.99 1937 1938 1939 1940 - 35.26 33.20 -91 - 10.08 -11.77 21.07 25.76 1.45 2.86 -2.78 .00 -.13 6.26 5.71 10.34 .27 .06 .04 .04 1941 1942 1943 -8.66 2.67 2.50 .14 .34 .38 .71 9.93 9.03 2.96 1944 1945 1946 1947 19.69 36.46 -8.18 5.24 2.88 5.17 38 .38 .38 .62 2.30 2.25 18.13 4.07 -1.15 1948 1949 1950 1951 5.10 18.06 30.58 24.55 8.84 2.99 -2.07 5.93 2.10 7.02 1.06 1.12 1.22 1.56 -1.44 -3.53 1952 1953 1954 18.50 - 1.10 52.40 1.82 - 88 7.89 1.75 1.87 .93 6.00 .75 .75 1955 1956 31.43 6.63 - 1.03 -3.14 1.80 2.66 -.74 37 2.99

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Step 1 of 2 A Tbills are an instrument that represents shortte... View the full answer