U CLUJUULUURL.COM/m.lox connect FINANCE onnect 6 Question 2 (of 10) value: 10.00 points Consider the following...

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Answer 1

Answer #1

Average nominal treasury bill return = i = (4.00+3.85+4.75+5.17+2.97+1.85+1.58)/7 = 3.45%

Average Inflation rate = π = (-1.26-2.40-1.30+0.72-6.54-9.47-1.41)/7 = -3.09%

Let real return for treasury bills = r

According to the Fisher Equation,

(1 + i) = (1 + r) × (1 + π)

=> r = (1 + i)/(1 + π) - 1

= (1 + 0.0345)/(1 - 0.0309) - 1

= 0.0675

= 6.75%

Hence, Average real return = 6.75%

Answer 2

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