Question content area top

Part 1

(Calculating rates of return)The S&P stock index represents a portfolio comprised of 500 large publicly traded companies. On December 24, 2007, the index had a value of 1,410 and on December 24, 2008, the index was approximately

864.

If the average dividend paid on the stocks in the index is approximately

3.0

percent of the value of the index at the beginning of the year, what is the rate of return earned on the S&P index? What is your assessment of the relative riskiness of investing in a single stock such as Google compared to investing in the S&P index (recall from Chapter 2 that you can purchase mutual funds that mimic the returns of the index)?

Question content area bottom

Part 1

The rate of return earned on the S&P 500 is

enter your response here%.

(Round to two decimal places.)

Part 2

What is your assessment of the relative riskiness of investing in a single stock, such as Google, compared to investing in the S&P index? (Select the best choice below.)

A.

In general, investing in a single stock has the same relative riskiness as investing in the S&P index.

B.

There is not enough information given to answer this question.

C.

In general, investing in the S&P index is riskier than investing in a single stock.

D.

In general, investing in a single stock is riskier than investing in the S&P index.