For the 20 years ended December 31, 2006, the annually compounded rate of return on the portfolio of stocks represented by the S&P/TSX Composite Index was 10.0%. For the same period, the compound annual rate of inflation (as measured by the increase in the Consumer Price Index) was 2.00%.
a) What was $1,000 invested in the S&P/TSX stock portfolio on December 31, 1996, worth 20 years later?
b) What amount of money was needed on December 31, 2006, to have the same purchasing power as $1,000 on December 31, 1996?
c) For an investment in the Index stock portfolio, what was the percent increase in purchasing power of the original $1,000?

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The Answer of For the 20 years ended December 31, 2006, the annually compounded rate of return on the portfolio of stocks represented by the S&P/TSX Composite Index was 10.0%. For the same period, the compound annual rate of inflation (as measured by the increase in the Consumer Price Index) was 2.00%.
a) What was $1,000 invested in the S&P/TSX stock portfolio on December 31, 1996, worth 20 years later?
b) What amount of money was needed on December 31, 2006, to have the same purchasing power as $1,000 on December 31, 1996?
c) For an investment in the Index stock portfolio, what was the percent increase in purchasing power of the original $1,000?

For the 20 Years Ended December 31, 2006, the Annually