The prices are reported at the end of the year, and the dividends are added up for the entire year Year Earnings Yield Dividend Yield S P 500 Earnings Dividends Payout Ratio 1960 5 34 3 41 58 11 3 10 1 98 63 86 1961 4 71 2 85 71 55 3 37 2 04 60 51 1962 5 81 3 40 63 1 3 67 2 15 58 52 1963 5 51 3 13 75 02 4 13 2 35 56 81 1964 5 62 3 05 84 75 4 76 2 58 54 27 1965 5 73 3 06 92 43 5 30 2 83 53 40 1966 6 74 3 59 80 33 5 41 2 88 53 26 1967 5 66 3 09 96 47 5 46 2 98 54 59 1968 5 51 2 93 103 86 5 72 3 04 53 18 1969 6 63 3 52 92 06 6 10 3 24 53 09 1970 5 98 3 46 92 15 5 51 3 19 57 86 1971 5 46 3 10 102 09 5 57 3 16 56 78 1972 5 23 2 70 118 05 6 17 3 19 51 63 1973 8 16 3 70 97 55 7 96 3 61 45 34 1974 13 64 5 43 68 56 9 35 3 72 39 81 1975 8 55 4 14 90 19 7 71 3 73 48 42 1976 9 07 3 93 107 46 9 75 4 22 43 33 1977 11 43 5 11 95 1 10 87 4 86 44 71 1978 12 11 5 39 96 11 11 64 5 18 44 51 1979 13 48 5 53 107 94 14 55 5 97 41 02 1980 11 04 4 74 135 76 14 99 6 44 42 93 1981 12 39 5 57 122 55 15 18 6 83 44 96 1982 9 83 4 93 140 64 13 82 6 93 50 15 1983 8 06 4 32 164 93 13 29 7 12 53 60 1984 10 07 4 68 167 24 16 84 7 83 46 47 1985 7 42 3 88 211 28 15 68 8 20 52 29 1986 5 96 3 38 242 17 14 43 8 19 56 71 1987 6 49 3 71 247 08 16 04 9 17 57 16 1988 8 69 3 68 277 72 24 12 9 75 40 42 1989 6 88 3 32 353 4 24 32 11 06 45 48 1990 6 86 3 74 330 22 22 65 12 09 53 38 1991 4 63 3 11 417 09 19 30 12 20 63 21 1992 4 79 2 90 435 71 20 87 12 39 59 37 1993 5 77 2 72 466 45 26 90 12 58 46 77 1994 6 91 2 91 459 27 31 75 13 17 41 48 1995 6 12 2 30 615 93 37 70 13 79 36 58 1996 5 49 2 01 740 74 40 63 14 90 36 67 1997 4 54 1 60 970 43 44 09 15 50 35 16 1998 3 60 1 32 1229 23 44 27 16 20 36 59 1999 3 52 1 14 1469 25 51 68 16 69 32 29 2000 4 25 1 23 1320 28 56 13 16 07 28 63 2001 3 38 1 37 1148 09 38 85 15 74 40 51 2002 5 23 1 81 879 82 46 04 15 96 34 67 2003 4 92 1 61 1111 91 54 69 17 88 32 69 2004 5 58 1 57 1211 92 67 68 19 01 28 09 2005 6 12 1 79 1248 29 76 45 22 34 29 23 2006 6 18 1 77 1418 3 87 72 25 04 28 55 2007 5 62 1 92 1468 36 82 54 28 14 34 09 2008 5 48 3 15 903 25 49 51 28 45 57 46 2009 5 10 1 97 1115 1 56 86 21 97 38 64 2010 6 66 1 80 1257 64 83 77 22 65 27 04 2011 7 67 2 11 1257 60 96 44 26 53 27 51 2012 6 79 2 19 1426 19 96 82 31 25 32 28 2013 5 68 1 89 1848 36 104 92 34 90 33 26 2014 5 64 1 92 2058 90 116 16 39 55 34 04 2015 4 92 2 12 2043 94 100 48 43 41 43 20 2016 4 75 2 04 2238 83 106 26 45 70 43 01 2017 4 66 1 83 2673 61 124 51 48 93 39 30 2018 5 92 2 14 2506 85 148 34 53 61 36 14 2019 5 03 1 82 3230 78 162 35 58 80 36 22 2020 3 68 1 51 3756 07 138 12 56 70 41 05 2021 4 33 1 24 4766 18 206 38 59 20 28 68 (a) Calculate the HPR for each of the years in sample Note that the holding period from the end of 1960 to the end of 1961 is the first one for which you can do the calculation Recall that the HPR reflects both capital gains and dividend payments For this calculation assume the dividends are paid out once at the end of the year (b) What is your best estimate of the expected HPR for next year (c) What would have been the annualized HPR if you invested at the end of 1960, and sold at the end of 2021 Assume that at the end of each year you reinvest all dividends (d) What year saw the lowest HPR What happened (e) Starting with an investment in the year after the lowest annual return on record, what would have been the return over the subsequent 5 years Assume again you reinvest all dividends at the end of each year (f) What is the annualized HPR for the 5 year investment starting after the lowest return year Ho does it compare to the annualized HPR from the en of 1960 to the end of to 2021 you calculated in part (c) (a) Calculate the HPR for each of the years in sample Note that the holding period from the end of 1960 to the end of 1961 is the first one for which you can do the calculation Recall that the HPR reflects both capital gains and dividend payments For this calculation assume the dividends are paid out once at the end of the year (b) What is your best estimate of the expected HPR for next year (c) What would have been the annualized HPR if you invested at the end of 1960, and sold at the end of 2021 Assume that at the end of each year you reinvest all dividends (d) What year saw the lowest HPR What happened (e) Starting with an investment in the year after the lowest annual return on record, what would have been the return over the subsequent 5 years Assume again you reinvest all dividends at the end of each year (f) What is the annualized HPR for the 5 year investment starting after the lowest return year Ho does it compare to the annualized HPR from the en of 1960 to the end of to 2021 you calculated in part (c)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 19, 2024

The prices are reported at the end of the year, and the dividends are added up for the entire year. Year Earnings Yield Dividend Yield

The prices are reported at the end of the year, and the dividends are added up for the entire year.

Year	Earnings Yield	Dividend Yield	S&P 500	Earnings	Dividends	Payout Ratio
1960	5.34%	3.41%	58.11	3.10	1.98	63.86%
1961	4.71%	2.85%	71.55	3.37	2.04	60.51%
1962	5.81%	3.40%	63.1	3.67	2.15	58.52%
1963	5.51%	3.13%	75.02	4.13	2.35	56.81%
1964	5.62%	3.05%	84.75	4.76	2.58	54.27%
1965	5.73%	3.06%	92.43	5.30	2.83	53.40%
1966	6.74%	3.59%	80.33	5.41	2.88	53.26%
1967	5.66%	3.09%	96.47	5.46	2.98	54.59%
1968	5.51%	2.93%	103.86	5.72	3.04	53.18%
1969	6.63%	3.52%	92.06	6.10	3.24	53.09%
1970	5.98%	3.46%	92.15	5.51	3.19	57.86%
1971	5.46%	3.10%	102.09	5.57	3.16	56.78%
1972	5.23%	2.70%	118.05	6.17	3.19	51.63%
1973	8.16%	3.70%	97.55	7.96	3.61	45.34%
1974	13.64%	5.43%	68.56	9.35	3.72	39.81%
1975	8.55%	4.14%	90.19	7.71	3.73	48.42%
1976	9.07%	3.93%	107.46	9.75	4.22	43.33%
1977	11.43%	5.11%	95.1	10.87	4.86	44.71%
1978	12.11%	5.39%	96.11	11.64	5.18	44.51%
1979	13.48%	5.53%	107.94	14.55	5.97	41.02%
1980	11.04%	4.74%	135.76	14.99	6.44	42.93%
1981	12.39%	5.57%	122.55	15.18	6.83	44.96%
1982	9.83%	4.93%	140.64	13.82	6.93	50.15%
1983	8.06%	4.32%	164.93	13.29	7.12	53.60%
1984	10.07%	4.68%	167.24	16.84	7.83	46.47%
1985	7.42%	3.88%	211.28	15.68	8.20	52.29%
1986	5.96%	3.38%	242.17	14.43	8.19	56.71%
1987	6.49%	3.71%	247.08	16.04	9.17	57.16%
1988	8.69%	3.68%	277.72	24.12	9.75	40.42%
1989	6.88%	3.32%	353.4	24.32	11.06	45.48%
1990	6.86%	3.74%	330.22	22.65	12.09	53.38%
1991	4.63%	3.11%	417.09	19.30	12.20	63.21%
1992	4.79%	2.90%	435.71	20.87	12.39	59.37%
1993	5.77%	2.72%	466.45	26.90	12.58	46.77%
1994	6.91%	2.91%	459.27	31.75	13.17	41.48%
1995	6.12%	2.30%	615.93	37.70	13.79	36.58%
1996	5.49%	2.01%	740.74	40.63	14.90	36.67%
1997	4.54%	1.60%	970.43	44.09	15.50	35.16%
1998	3.60%	1.32%	1229.23	44.27	16.20	36.59%
1999	3.52%	1.14%	1469.25	51.68	16.69	32.29%
2000	4.25%	1.23%	1320.28	56.13	16.07	28.63%
2001	3.38%	1.37%	1148.09	38.85	15.74	40.51%
2002	5.23%	1.81%	879.82	46.04	15.96	34.67%
2003	4.92%	1.61%	1111.91	54.69	17.88	32.69%
2004	5.58%	1.57%	1211.92	67.68	19.01	28.09%
2005	6.12%	1.79%	1248.29	76.45	22.34	29.23%
2006	6.18%	1.77%	1418.3	87.72	25.04	28.55%
2007	5.62%	1.92%	1468.36	82.54	28.14	34.09%
2008	5.48%	3.15%	903.25	49.51	28.45	57.46%
2009	5.10%	1.97%	1115.1	56.86	21.97	38.64%
2010	6.66%	1.80%	1257.64	83.77	22.65	27.04%
2011	7.67%	2.11%	1257.60	96.44	26.53	27.51%
2012	6.79%	2.19%	1426.19	96.82	31.25	32.28%
2013	5.68%	1.89%	1848.36	104.92	34.90	33.26%
2014	5.64%	1.92%	2058.90	116.16	39.55	34.04%
2015	4.92%	2.12%	2043.94	100.48	43.41	43.20%
2016	4.75%	2.04%	2238.83	106.26	45.70	43.01%
2017	4.66%	1.83%	2673.61	124.51	48.93	39.30%
2018	5.92%	2.14%	2506.85	148.34	53.61	36.14%
2019	5.03%	1.82%	3230.78	162.35	58.80	36.22%
2020	3.68%	1.51%	3756.07	138.12	56.70	41.05%
2021	4.33%	1.24%	4766.18	206.38	59.20	28.68%

image text in transcribed

(a) Calculate the HPR for each of the years in sample. Note that the holding period from the end of 1960 to the end of 1961 is the first one for which you can do the calculation. Recall that the HPR reflects both capital gains and dividend payments. For this calculation assume the dividends are paid out once at the end of the year. (b) What is your best estimate of the expected HPR for next year? (c) What would have been the annualized HPR if you invested at the end of 1960, and sold at the end of 2021? Assume that at the end of each year you reinvest all dividends. (d) What year saw the lowest HPR? What happened? (e) Starting with an investment in the year after the lowest annual return on record, what would have been the return over the subsequent 5 years? Assume again you reinvest all dividends at the end of each year. (f) What is the annualized HPR for the 5-year investment starting after the lowest return year? Ho does it compare to the annualized HPR from the en of 1960 to the end of to 2021 you calculated in part (c)? (a) Calculate the HPR for each of the years in sample. Note that the holding period from the end of 1960 to the end of 1961 is the first one for which you can do the calculation. Recall that the HPR reflects both capital gains and dividend payments. For this calculation assume the dividends are paid out once at the end of the year. (b) What is your best estimate of the expected HPR for next year? (c) What would have been the annualized HPR if you invested at the end of 1960, and sold at the end of 2021? Assume that at the end of each year you reinvest all dividends. (d) What year saw the lowest HPR? What happened? (e) Starting with an investment in the year after the lowest annual return on record, what would have been the return over the subsequent 5 years? Assume again you reinvest all dividends at the end of each year. (f) What is the annualized HPR for the 5-year investment starting after the lowest return year? Ho does it compare to the annualized HPR from the en of 1960 to the end of to 2021 you calculated in part (c)