You are on the investment committee of the university endowment. As part of the process in developing capital market expectations, you have been tasked with coming up with the nominal 5- year projected equity market returns for the asset class consisting of U.S. equity securities. Using the information below, forecast the 5-year equity market return based on the Ibbotsen-Chen macroeconomic model. You forecast inflation will run at 3% per year, slightly higher than the Fed's 2% target due to short term supply chain constraints that should moderate in the back half of the forecast horizon. The labor force in the U.S. has grown historically at around 1%, annually. However, due to demographic factors, you believe that this growth rate will slow to 0.5% while you expect labor force productivity to grow around 2.0% per year. You expect dividend yields, which have come down, due to higher market valuations and low interest rates to average around 1.5% over the forecast period. The price to earnings ratio on the broad equity index is currently at the high end of its historical at around 38. While you do believe that this multiple is likely to remain higher than. the historical average, due to low real interest rates, you expect that it will experience some degree of mean reversion to 30 by the end of the 5-year period. The 5-year treasury rate is currently at 1%. 1. What is the projected annual rate of real economic growth over the 5-year period? 2. What is the projected annualized percent change in price-to-carnings ratio over the 5-year period? 3. What is the projected equity market return based on the Ibbotsen-Chen macroeconomic model