14. Suppose that the inflation rate is expected to be 3% in the near future. Using thehistorical data provided in this chapter, what would be your predictions for1. The T-bill rate2. The expected rate of return on the stocks portfolio3. The risk premium on the stock market Average (%)InflationT-bills5.585 3.635 1.8921.8591.925Real T-billAll MonthsFirst half (1957-1988) 7.122 5.196Recent half (1989-2020)4.049 2.073Standard Deviation (%)Real T-billT-bills4.007 2.9703.973 3.3813.458 1.211Inflation2.8953.0472.784

T-bill rate : The T-bill rate refers to the interest rate offered on Treasury bills, which are…

14. Suppose that the inflation rate is expected to be 3% in the near future. Using the historical data provided in this chapter, what would be your predictions for 1. The T-bill rate 2. The expected rate of return on the stocks portfolio 3. The risk premium on the stock market

14. Suppose that the inflation rate is expected to be 3% in the near future. Using the historical data provided in this chapter, what would be your predictions for 1. The T-bill rate 2. The expected rate of return on the stocks portfolio 3. The risk premium on the stock market

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter31: Capital Markets

Section: Chapter Questions

Problem 9E

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Question

14. Suppose that the inflation rate is expected to be 3% in the near future. Using the
historical data provided in this chapter, what would be your predictions for
1. The T-bill rate
2. The expected rate of return on the stocks portfolio
3. The risk premium on the stock market

Average (%)
Inflation
T-
bills
5.585 3.635 1.892
1.859
1.925
Real T-
bill
All Months
First half (1957-1988) 7.122 5.196
Recent half (1989-
2020)
4.049 2.073
Standard Deviation (%)
Real T-
bill
T-
bills
4.007 2.970
3.973 3.381
3.458 1.211
Inflation
2.895
3.047
2.784

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