portfolio management and investment
Problem 1-09
During the past year, you had a portfolio that contained U.S. government T-bills, long-term government bonds, and common stocks. The rates of return on each of them were as follows:
| U.S. government T-bills | 4.70 | % |
| U.S. government long-term bonds | 6.60 | |
| U.S. common stocks | 7.60 |
During the year, the consumer price index, which measures the rate of inflation, went from 100 to 116 (1982 – 1984 = 100). Compute the rate of inflation during this year. Round your answer to one decimal place.
Compute the real rates of return on each of the investments in your portfolio based on the inflation rate. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to two decimal places.
| Real rate of return | |
| U.S. government T-bills | |
| U.S. government long-term bonds | |
| U.S. common stocks |
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