Download the file hw2.xls that has annual value-weighted NYSE/AMEX/NASDAQ portfolio stock returns, annualized treasury bill returns, and annual CPI inflation. (Note: all returns are in decimal format. You need to multiply them by 100 if you want to convert them to percentages.) To check that you got it right, hw2.xls includes the first few years of real returns.

4) (a) Plot the nominal stock and Tbill returns over time in the same graph

(b) Plot the real stock and Tbill returns over time in the same graph

Plot the cumulative stock and Tbill returns the real value at each date of $1 invested in 1926 (Plot, using the real interest rates, the $value of your initial investment of $1 over time.)

What do you learn from these graphs?