Problem 10-22 Calculating Returns

Suppose we have the following Treasury bill returns and inflation rates over an eight-year period:

Year	Treasury Bills	Inflation
1	7.96%	9.57%
2	8.76	13.22
3	6.59	7.71
4	5.74	5.48
5	6.17	7.47
6	8.41	9.84
7	11.38	14.14
8	13.02	13.56

a.	Calculate the average return for Treasury bills and the average annual inflation rate for this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

	Average return
Treasury bills	%
Inflation	%

b.	Calculate the standard deviation of Treasury bill returns and inflation over this period. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

	Standard deviation
Treasury bills	%
Inflation	%

c.	What was the average real return for Treasury bills over this period? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Average real return

%