10.27 T-bills and inflation.
Exercises 10.6 through 10.8 interpret the part of the Excel output in Figure 10.10 (page 499) that concerns the slope, the rate at which T-bill returns increase as the rate of inflation increases. Use this output to answer questions about the intercept.
10.27
(a) is the return on T-bills when there is no inflation. Without inflation, we would expect a positive return on any invested money. (b) . (c) . There is significant evidence that the intercept is greater than 0. (d) Using , which gives the same answer as Excel (with rounding error).