3. The following table gives actual data on the U.S. CPI and the S&P 500 total return index (SPTRI). CPI SPTRI 12/3 1/2011 226 2159 12/3 1/2012 230 2504 12/3 1/2013 233 3316 12/3 1/2014 235 3769 А. Use this data to compute the average annual nominal return and real return for two consecutive 1- year holding period returns of a sto ck portfolio that matches the S&P 500 total return index. (for example you could compute 2011-12 and 2012-2013) Please use continuous compounding. Express your final answer in percentage. В. Now compute the average annual real return to a 2-year holding -period portfolio of your two consecutive years. С. You have a friend who has been studying the stock market for the last few years and is about to invest $10,000 in a highly diversified portfolio. After 10 years, your friend expects to have over $66,000 in real dollars. You recall from your favorite report in Econ 135 that the average 10 year holding period return is about 7% with a standard deviation of 6%. Do you think your fri end's expectations are realistic? Why or why not?
3. The following table gives actual data on the U.S. CPI and the S&P 500 total return index (SPTRI). CPI SPTRI 12/3 1/2011 226 2159 12/3 1/2012 230 2504 12/3 1/2013 233 3316 12/3 1/2014 235 3769 А. Use this data to compute the average annual nominal return and real return for two consecutive 1- year holding period returns of a sto ck portfolio that matches the S&P 500 total return index. (for example you could compute 2011-12 and 2012-2013) Please use continuous compounding. Express your final answer in percentage. В. Now compute the average annual real return to a 2-year holding -period portfolio of your two consecutive years. С. You have a friend who has been studying the stock market for the last few years and is about to invest $10,000 in a highly diversified portfolio. After 10 years, your friend expects to have over $66,000 in real dollars. You recall from your favorite report in Econ 135 that the average 10 year holding period return is about 7% with a standard deviation of 6%. Do you think your fri end's expectations are realistic? Why or why not?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:3. The following table gives actual data on the U.S. CPI and the S&P 500 total return index (SPTRI).
CPI
SPTRI
12/3 1/2011
226
2159
12/3 1/2012
230
2504
12/3 1/2013
233
3316
12/3 1/2014
235
3769
А.
Use this data to compute the average annual nominal return and real return for two consecutive 1-
year holding period returns of a sto ck portfolio that matches the S&P 500 total return index. (for example
you could compute 2011-12 and 2012-2013) Please use continuous compounding. Express your final
answer in percentage.
В.
Now compute the average annual real return to a 2-year holding -period portfolio of your two
consecutive years.
С.
You have a friend who has been studying the stock market for the last few years and is about to
invest $10,000 in a highly diversified portfolio. After 10 years, your friend expects to have over $66,000
in real dollars. You recall from your favorite report in Econ 135 that the average 10 year holding period
return is about 7% with a standard deviation of 6%. Do you think your fri end's expectations are realistic?
Why or why not?
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