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Consider the following table for an eight-year period: YEAR T-BILL RETURN INFLATION 1 7.42 % 8.58 % 2 8.69 12.21 3 6.00 6.81 4 5.72

Consider the following table for an eight-year period:

YEAR T-BILL RETURN INFLATION
1 7.42 % 8.58 %
2 8.69 12.21
3 6.00 6.81
4 5.72 4.99
5 5.58 6.57
6 8.29 8.89
7 10.69 13.16
8 12.75 12.39

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

2. Calculate the standard deviation of Treasury bill returns and inflation over this time period.

3. Calculate the real return for each year.

4. What is the average real return for Treasury bills?

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