Exhibit 1.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

Exhibit 1.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information
Nominal annual return on U.S. government T-bills for year 2009 = 3.5%
Nominal annual return on U.S. government long-term bonds for year 2009 = 4.75%
Nominal annual return on U.S. large-cap stocks for year 2009= 8.75%
Consumer price index January 1, 2009 = 165
Consumer price index December 31, 2009 = 169
-Refer to Exhibit 1.7. Calculate the annual real rate of return for U.S. T-bills.

A) 2.26%
B) 1.81%
C) -0.5%
D) 1.05%
E) None of the above