Question: For the 10 years ended December 31, 2008, the annually compounded rate of return on the portfolio of stocks represented by the S&P/ TSX Composite

For the 10 years ended December 31, 2008, the annually compounded rate of return on the portfolio of stocks represented by the S&P/ TSX Composite Index was 2.66%. For the same period, the compound annual rate of inflation (as measured by the increase in the Consumer Price Index) was 2.39%.
a. What was $1000 invested in the Index stock portfolio on December 31, 1998, worth 10 years later?
b. What amount of money was needed on December 31, 2008, to have the same purchasing power as $1000 on December 31, 1998?
c. For an investment in the Index stock portfolio, what was the percent increase in purchasing power of the original $1000?

Step by Step Solution

★★★★★

3.49 Rating (159 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a Portfolio value b Amount required on December 31 2008 to have the sam... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

711-B-C-F-P-V (334).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

The financial statements of the Gray Company showed income before income taxes of $4,030,000 for the year ended December 31, 2008, and $3,330,000 for the year ended December 31, 2007. Additional...

On June 1, 2007, Sunderland Inc. purchased as a long-term investment 400 of the $1,000 face value, 8% bonds of Stateline Corporation for $364,547. The bonds were purchased to yield 10% interest....

On January 1, 2008, Titania Inc. granted stock options to officers and key employees for the purchase of 20,000 shares of the companys $10 par common stock at $25 per share. The options were...

For the 10 years ended December 31, 2008, the annually compounded rate of return on the portfolio of stocks represented by the S&P/ TSX Composite Index was 2.66%. For the same period, the compound...

From 1998-2006 there were four large, well-funded competitors in the regional theme park industry. In order: Six Flags, Cedar Fair, Paramount Parks, and Busch Entertainment. Of these, Cedar Fair was...

Cedar Fair CaseCompanion Case to Six Flags CaseFrom 1998-2006 there were four large, well-funded competitors in the regional theme park industry. Inorder: Six Flags, Cedar Fair, Paramount Parks, and...

for the 10 years ended December 31 2018the annually compounded monthly rate of return on the portfolio of stocks represented by the S&P/TSX composite Index was 7.9%. for the same period, the compound...

For question B, I don't know the differences between gradual parallel shifts and instantaneous parallel shifts in yield curves. And how to connect it with question C? I don't see the connection. In...

Suppose you are a manufacturer of product ABC, which is composed of parts A, B, and C. Each time a new product is created, it must be added to the product inventory, using the PROD_QOH in a table...

find the correct Market Implied cost of capital (ROE) in excel using the solver function with the data given below Stock Valuation: 10-Period Growth Model 3.21% Long run dividend growth rate 12.33%...

Which of the following is a disadvantage of defined contribution ( DC ) plans over defined benefit plans ( DB ) ?

The total of cash plus marketable securities divided by current liabilities is the formula used to calculate the a. current ratio b. liquidity ratio c. debt ratio d. quick ratio

What are some examples of internal users of accounting information?

What is meant by a database warehousing approach for the creation of useful accounting information for internal management?

What are the three primary ways enterprises use their management accounting information?

1.An Ipsos poll found that 452 out of 1005 people believe that UFOs exist and have visited the Earth. a.Find the 99% confidence interval of this distribution. b.What minimum sample size would be...

Camille Noah is investing $5,000 in an account that pays artannually compounded rate of 6.75 percent for three year. What is the interest on interest if interest is compounded? $1,082.38 $69.88...

You have been asked to test the effectiveness of Ingo Corporation's control of manually approving all purchases over $25,000. During the year, lngo Corporation has made 1,000,000 purchases, of which...