What should investors have reasonably expected

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Problem 1: In 2000, the P/E ratio of the stock market reached about 45. If you assume that these corporations will grow roughly at the overall economy's (GDP) growth rate of 4-5% per year, what should investors have reasonably expected in terms of a likely future rate of return implied by the stock market's level? Show your work.

Problem 2: An insurance company offers a retirement annuity that pays $100,000 per year for 15 years, growing at an "inflation-compensator" rate of 3%, and sells for $806,070. What is the interest rate? Show your work.

Reference no: EM132765368

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