USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 72

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information
Nominal annual return on U.S. government T-bills for year 2018 = 3.5%
Nominal annual return on U.S. government long-term bonds for year 2018 = 4.75%
Nominal annual return on U.S. large-cap stocks for year 2018= 8.75%
Consumer price index January 1, 2018 = 165
Consumer price index December 31, 2018 = 169
-Refer to Exhibit 1.10. 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) 0%

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Definitions:

Discretionary Investment Power

The authority granted to manage and make investment decisions on behalf of someone else, typically within specified parameters.

Conservative Debt Securities

Investments in fixed-income securities that are considered low risk, typically issued by government entities or stable corporations.

Prudent Person

A legal standard used to represent the hypothetical individual who exercises average care, skill, and judgment in decision-making, serving as a comparative standard in legal and financial fields.

Discretionary Investment Power

The authority given to a person or entity to make investment decisions on behalf of another without needing express consent for each decision.