The following table shows the annual rates of return for several assets and the rate of inflation.

(a) Use the method of least squares to estimate the relationship between the rate of return on common stocks and the rate of inflation by using the MINITAB program.

(b) Do common stocks serve as a hedge against inflation?

(c) Repeat parts

(a) and (b), using corporate bond returns.

(d) Repeat parts

(a) and (b), using treasury bond returns.

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Year 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 Common stocks 24.0 % 11.1 -8.5 4.0 14.3 19.0 - 14.7 -26.5 37.2 23.8 -7.2 6.6 18.4 32.4 -4.9 21.4 22.5 6.3 32.2 18.6 Corporate bonds -5.0 % 2.6 -8.1 18.4 11.0 7.3 1.1 -3.1 14.6 18.6 1.7 -.1 -4.2 -2.6 -1.0 43.8 4.7 16.4 30.9 18.5 Treasury bonds -9.2 % -.3 -5.1 12.1 13.2 5.7 -1.1 4.4 9.2 16.8 -.7 -1.2 -1.2 -4.0 1.8 40.3 .7 15.4 31.0 23.4 Rate of inflation 3.0% 4.7 6.1 5.5 3.4 3.4 8.8 12.2 7.0 4.8 6.8 9.0 13.3 12.4 8.9 3.9 3.8 4.0 3.8 1.1