An older article in The Wall Street Journal included the following paragraph: “Based on the S&P 500’s current multiple of 16.8 times earnings over the past 12 months, according to Thomson Reuters, investors are anticipating modest inflation. Since 1950, in periods when inflation ran between 2% and 4% [as it has through much of this decade], stocks traded at an average price/earnings ratio of 17.4, according to Strategas Research Partners. But in a 4% to 6% inflation environment, the average P/E ratio dropped to 14.7. Use the data to calculate the Rate of Return based on the Earnings Yield model for time periods when inflation ranged from 2% to 4%. Use the mid-point of the inflation range to derive the numbers and enter your answer as a percentage rounded to 2 decimals. Rate of Return: Use the data to calculate the Rate of Return based on the Earnings Yield model for time periods when inflation ranged from 4% to 6%. Use the mid-point of the inflation range to derive the numbers and enter your answer as a percentage. Rate of Return:
An older article in The Wall Street Journal included the following paragraph: “Based on the S&P 500’s current multiple of 16.8 times earnings over the past 12 months, according to Thomson Reuters, investors are anticipating modest inflation. Since 1950, in periods when inflation ran between 2% and 4% [as it has through much of this decade], stocks traded at an average price/earnings ratio of 17.4, according to Strategas Research Partners. But in a 4% to 6% inflation environment, the average P/E ratio dropped to 14.7. Use the data to calculate the Rate of Return based on the Earnings Yield model for time periods when inflation ranged from 2% to 4%. Use the mid-point of the inflation range to derive the numbers and enter your answer as a percentage rounded to 2 decimals. Rate of Return: Use the data to calculate the Rate of Return based on the Earnings Yield model for time periods when inflation ranged from 4% to 6%. Use the mid-point of the inflation range to derive the numbers and enter your answer as a percentage. Rate of Return:
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Questions 12 and 13 are based on the information below.
An older article in The Wall Street Journal included the following paragraph: “Based on the S&P 500’s current multiple of 16.8 times earnings over the past 12 months, according to Thomson Reuters, investors are anticipating modest inflation. Since 1950, in periods when inflation ran between 2% and 4% [as it has through much of this decade], stocks traded at an average price/earnings ratio of 17.4, according to Strategas Research Partners. But in a 4% to 6% inflation environment, the average P/E ratio dropped to 14.7.
- Use the data to calculate the
Rate of Return based on the Earnings Yield model for time periods when inflation ranged from 2% to 4%. Use the mid-point of the inflation range to derive the numbers and enter your answer as a percentage rounded to 2 decimals.
Rate of Return:
- Use the data to calculate the Rate of Return based on the Earnings Yield model for time periods when inflation ranged from 4% to 6%. Use the mid-point of the inflation range to derive the numbers and enter your answer as a percentage.
Rate of Return:
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