Question: Problem 5-14 All months First half Recent half T-Bills 3.46 1.04 4.45 Average Annual Rates Inflation Real T-Bill 1.70 0.56 1.68 0.29 3.53 0.90 T-Bills

Problem 5-14 All months First half Recent half T-Bills 3.46 1.04

Problem 5-14 All months First half Recent half T-Bills 3.46 1.04 4.45 Average Annual Rates Inflation Real T-Bill 1.70 0.56 1.68 0.29 3.53 0.90 T-Bills 3.12 1.29 3. 11 Standard Deviation Inflation 4.07 5.95 2.89 Real T-Bill 3.81 6.27 2.13 (1926-2016) Mean excess return (annualized) Standard deviation (annualized) Market Index 0.83 18.64 Big/ Growth 7.98 18.50 Big/ Value 11.67 24.62 Small/ Growth 8. 79 26. 21 Small/ Value 15. 56 28. 36 Suppose that the inflation rate is expected to be 1.70% in the near future using the data provided above, what would be you predictions for the following? (Round your answers to 2 decimal places.) a. The T-bill rate? b. The expected rate of return on the Big/Value portfolio? c. The risk premium on the stock market? % % Problem 5-14 All months First half Recent half T-Bills 3.46 1.04 4.45 Average Annual Rates Inflation Real T-Bill 1.70 0.56 1.68 0.29 3.53 0.90 T-Bills 3.12 1.29 3. 11 Standard Deviation Inflation 4.07 5.95 2.89 Real T-Bill 3.81 6.27 2.13 (1926-2016) Mean excess return (annualized) Standard deviation (annualized) Market Index 0.83 18.64 Big/ Growth 7.98 18.50 Big/ Value 11.67 24.62 Small/ Growth 8. 79 26. 21 Small/ Value 15. 56 28. 36 Suppose that the inflation rate is expected to be 1.70% in the near future using the data provided above, what would be you predictions for the following? (Round your answers to 2 decimal places.) a. The T-bill rate? b. The expected rate of return on the Big/Value portfolio? c. The risk premium on the stock market? % %

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