Using the data in Table 10.2,

a. What was the average dividend yield for the SP500 from 2002–2014?

b. What was the volatility of the dividend yield?

c. What was the average annual return of the SP500 from 2002–2014 excluding dividends (i.e., from capital gains only)?

d. What was the volatility of the S&P 500 returns from capital gains?

e. Were dividends or capital gains a more important component of the S&P 500’s average returns during this period? Which were the more important source of volatility?

Table 10.2

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TABLE 10.2 Year End 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Realized Return for the S&P 500, Microsoft, and Treasury Bills, 2002-2014 Microsoft Realized S&P 500 Index Dividends Paid* S&P 500 Realized Return 1148.08 879.82 1111.92 1211.92 1248.29 1418.30 1468.36 903.25 1115.10 1257.64 1257.60 1426.19 1848.36 2058.90 14.53 20.80 20.98 23.15 27.16 27.86 21.85 27.19 25.44 26.59 32.67 39.75 42.47 -22.1% 28.7% 10.9% 4.9% 15.8% 5.5% -37.0% 26.5% 15.1% 2.1% 16.0% 32.4% 13.7% Return -22.0% 6.8% 8.9% -0.9% 15.8% 20.8% -44.4% 60.5% -6.5% -4.5% 5.8% 44.2% 27.5% 1-Month T-Bill Return 1.6% 1.0% 1.2% 3.0% 4.8% 4.7% 1.5% 0.1% 0.1% 0.0% 0.1% 0.0% 0.0% *Total dividends paid by the 500 stocks in the portfolio, based on the number of shares of each stock in the index, adjusted until the end of the year, assuming they were reinvested when paid. Source: Standard & Poor's, Microsoft and U.S. Treasury Data