Question: The S P stock index represents a portfolio comprised of 500
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 23, 2008, the index was approximately 890. If the average dividend paid on the stocks in the index is approximately 4 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 the Google investment (analyzed in the previous problem) compared to investing in the S&P index (recall from Chapter 2 that you can purchase mutual funds that mimic the returns to the index)?
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