Question: During the past year, you had a portfolio that contained U.S. government T-bills, long-term government bonds, and common stocks. The rates of return on each of them were as follows:

U.S. government T-bills                       5.50%

U.S. government long-term bonds          7.5

U.S. common stocks                           11.6

During the year, the consumer price index, which measures the rate of inflation, went from 160 to 172 (1982-1984 = 100). Compute the rate of inflation during this year. Compute the real rates of return on each of the investments in your portfolio based on the inflation rate.