Assume that over the period 1926–2010 the yield index component of common stocks had a geometric mean annual average of 3.99 percent. Calculate the cumulative wealth index for this component as of year‐end 2010. Using this value, calculate the cumulative wealth index for the price change component of common stocks using information in Figure 6‐2.

Figure 6‐2

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10,000 1,000 100 10 Stock - Corporate bonds - Treasury bonds →→Treasury bills --CPI I 1926 1930 0.1 1940 1950 1960 1970 1980 1990 2000 $2,420 $131 $20 2010 $87 12