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?