Look at the record of stock returns in Table 6.1.

a. How would you compare the average annual returns for the various decades?

b. Considering the average annual returns that have been generated over holding periods of 10 years or more, what rate of return do you feel is typical for the stock market in general? Is it unreasonable to expect this kind of return, on average, in the future? Explain.

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TABLE 6.1 HISTORICAL AVERAGE ANNUAL RETURNS ON THE STANDARD AND POOR'S 500, 1930-2014 Rate of Return from Dividends 5.7% 5.8% 4.7% 3.296 Rate of Return from Capital Gains Average Annual Total Return 4.3% 95% 20.9% 8.6% 1930s 3.8% 16.2% 5.496 3.396 13.8% 16.5% 4.196 24% 1.8% 3.9% 1796 18.996 1.196 11.4% 1900-2014