Question

5. If you receive a total return of 8% on your investment portfolio but inflation is running at 5% per year, what is your real rate of return? _____________________________________________

6. Dividend yield: Write down the formula to find a dividend yield. _________________________________________________________________________________

7. Look up the current price and calculate the dividend yield for the following companies: Company Ticker Dividend Current Price Dividend Yield Proctor & Gamble PG $2.87 $ % Apple, Inc. AAPL $2.92 $ % Consolidated Edison, Inc. ED $2.86 $ % Berkshire-Hathaway, Inc. (A) BRK-A $0.00 $ %

8. Price-to-earnings ratio: Write down the formula to find the P/E ratio: ________________________________________________________________________________

Answer 1

Calculate the real return as follows:

Real return = (1+ Nominal return)/(1+ Inflation rate) - 1

= (1+8%)/(1+5%)-1

=1.0286-1

= 0.0286 or 2.86%

Therefore, the real return is 2.86%.

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Dividend yield = Dividend/Current price.

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Please ask remaining questions separately.