A. Rate of return The level of the Syldavia market index is 21,000 at the start of the year and… 1 answer below »

A. Rate of return The level of the Syldavia market index is 21,000 at the start of the year and 25,500 at the end. The dividend yield on the index is 4.2%.

Don't use plagiarized sources. Get Your Custom Essay on
A. Rate of return The level of the Syldavia market index is 21,000 at the start of the year and… 1 answer below »
Just from $13/Page
Order Essay

a. What is the return on the index over the year?

b. If the interest rate is 6%, what is the risk premium over the year?

c. If the inflation rate is 8%, what is the real return on the index over the year?

B. Real versus nominal returns The Costaguana stock market provided a rate of return of 95%.

The inflation rate in Costaguana during the year was 80%. In Ruritania the stock market

return was 12%, but the inflation rate was only 2%. Which country’s stock market provided

the higher real rate of return?