Investment Analysis question

Question

The S&P500 is trading at 4,200, and the expected dividend over the next year is $63.00. You expect the economy to grow by 3% annually, and the annual inflation rate will be 5% over the long term. The yield to maturity on 10-year US Treasuries is 6.0%

 

What is the long-term expected return on the S&P500?

 

a. 9.500%

b. 1.500%

c. 7.500%

d. 3.500%

Answer 1

9.5% after accounting for inflation.