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Question:
An investor purchases 1,000 shares of each of the stocks in the S&P 500 Index at their closing prices (ignore transactions costs). On a total return basis, if the index stocks remain the same, this portfolio will:
A
outperform the index over time.
explanation
Total return includes dividend yield. Because dividends are not included in the performance of the index itself, the portfolio will outperform the index by the amount of the dividend yield.
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