Problem 10-22 Calculating Returns [LO 2, 3]

Consider the following table for an eight-year period:

YearT-bill returnInflation

17.32%8.68%

28.19 12.31

35.90 6.91

45.22 4.89

55.48 6.67

67.79 8.99

710.59 13.26

812.25 12.49

Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Average return for Treasury bills %

Average annual inflation rate %

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

Standard deviation of Treasury bills %

Standard deviation of inflation %

Calculate the real return for each year. (A negative answer should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

YearReal return

1%

2 %

3 %

4 %

5 %

6 %

7 %

8 %

What is the average real return for Treasury bills? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Average real return for Treasury bills %