1. Rate of return (S7.1) The level of the Syldavia market index is 21,000 at the start of the year and 25,500 at the end. The dividend yield on the index is 4.2%.

a. What is the return on the index over the year?

b. If the interest rate is 6%, what is the risk premium over the year?

c. If the inflation rate is 8%, what is the real return on the index over the year?