# Treasury Bills Returns and Inflation

Calculating Returns

Refer to the following table:

Year T-Bill Return Inflation

1973 0.0729 0.0871

1974 0.0799 0.1234

1975 0.0587 0.0694

1976 0.0507 0.0486

1977 0.0545 0.0670

1978 0.0764 0.0902

1979 0.1056 0.1329

1980 0.1210 0.1252

Requirement 1:

Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Do not include the percent sign (%). Round answers to 2 decimal places, e.g. 32.16.)

Average Treasury bill return percent

Average inflation percent

Requirement 2:

Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not include the percent sign (%). Round to 2 decimal places, e.g. 32.16.)

Standard deviation

T-bills percent

Inflation percent

Requirement 3:

Calculate the average real return for Treasury bills over this period. (Negative amount should be indicated by a minus sign. Do not include the percent sign (%). Round answers to 2 decimal places, e.g. 32.16.)

Average real return ______ percent

Please see attached file with problem.

#### Solution Preview

Please see attached file for complete answer.

Calculating Returns

Refer to the following table:

Year T-Bill Return Inflation

1973 0.0729 0.0871

1974 0.0799 0.1234

1975 0.0587 0.0694

1976 0.0507 0.0486

1977 0.0545 0.0670

1978 0.0764 0.0902

1979 0.1056 0.1329

1980 0.1210 0.1252

Requirement 1:

Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index) for this period. (Do not include the percent sign (%). Round answers to 2 decimal places, e.g. 32.16.)

Average Treasury bill return percent

Average inflation percent

Requirement 2:

Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not include the percent sign (%). Round to 2 decimal places, e.g. 32.16.)

Standard deviation

T-bills percent

Inflation percent

Requirement 3:

Calculate the average real return for Treasury bills over this period. (Negative amount should be indicated by a minus sign. Do not include the percent sign (%). Round answers to 2 decimal places, e.g. 32.16.)

Average real return ______ ...

#### Solution Summary

The solution:

1) Calculate the average return for Treasury bills and the average annual inflation rate (consumer price index).

2) Calculates the standard deviation of Treasury bill returns and inflation.

3) Calculates the average real return for Treasury bills.