Over the 10-Year Period from 1978 Through 1987, the Compound

Multiple Choice

Over the 10-year period from 1978 through 1987, the compound annual rate of return on U.S.Treasury bills was 9.17 percent.Over the same time period, the average annual inflation rate was 6.39 percent.Therefore,

A) the inflation premium was 2.78 percentage points
B) the real expected rate of return was 9.17 percentage points
C) the realized real rate of return was 2.78 percentage points
D) the required rate of return was 6.39 percentage points