Chapter 10, Problem 10P

a)

Summary Introduction

To determine: The average dividend yield for S&P 500.

Introduction:

Dividend yield is a ratio that specifies how much a company pays as dividends every year, on comparing with its share price. It is considered as the return on the investment for a stock.

b)

Summary Introduction

To determine: The volatility of the dividend yield.

Introduction:

Dividend is a sum of money paid to the shareholders of the company. It is distributed among the investors from the portion of company’s earnings.

c)

Summary Introduction

To determine: The average annual return of the S&P500 of 2002 to 2014.

Introduction:

Average annaul return refers to the returns that an investment earns in an average year over different periods.

d)

Summary Introduction

To determine: The volatility of the S&P500 returns from capital gains.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

e)

Summary Introduction

To discuss: The capital gains or dividends are most important components of the average returns of S&P500 in the period.

Introduction:

Capital gains yield is a ratio that indicates the rise in the price of the common stock.