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I read somewhere recently that there has been a posited "stock crash" since 2000. The premise of the writer was that because some stock indexes - I think the Dow Jones was used - are below their peaks, they have actually crashed in reality, because of the effect of inflation. So, while the media gets excited that an index is near "record highs", it may be that it is in fact 10-15% down since 2000, as this is the amount of inflation in this period. This sounds sensible to me, but... is it correct? What I am not clear in is the composition and calculation of the indexes. Is there something inherent in them that adjusts for or in other way reduces the effect of inflation? So... if an index is at 10,000 right now and we have 10% inflation in the next year, would the index need to be at 11,000 to actually remain at par? Thanks!

Best Answer

You are on the right track. More formally, you are asking about the difference between nominal and real rates of return. The nominal return is the raw or unadjusted increase. The real return is adjusted for the effects of inflation. If an index increases from 10k to 11k, the nominal return is 10%. However, if inflation reduces your purchasing power such that you can buy the same quantity/quality of goods this eyar with 11K that you bought last year with 10k, then the real return on you money is approximately 0%, even though your nominal return is 10%. Mathematically this is operationalized in the the Fisher equation: (1+r)(1+i)=1+R where r is the real return, i is the inflation rate and R is the nominal return. Multiplying this out gives you r+i+r*i=R. Since r*i is usually tiny- especially in the US- it is ignored. Thus, we have r+i=R. Since you always know the nominal return and an estimate of inflation, you can solve for r with r=R-i.

There is a price comparison index called the "Bic Mac Index" - rumours has it that there is also a "Coca-Cola Index" - but could not find any proof on that. Have you heard of a Coca-Cola-Index? Do you have any links to information on it?

Best Answer

Here is a link to the "Coca-Cola Index" as described by The Economist: http://www.economist.com/markets/bigmac/ displayStory.cfm?story_id=456039 Hope this helps!

Would a temperature change affect the refractive index and if so, how? Select the best explanation from those shown. 1) At higher temperatures, the liquid would evaporate and the refractive index could not be measured accurately. 2) Yes, a decrease in temperature would decrease the refractive index. 3) Yes, a decrease in temperature would increase the refractive index. 4) No, the refractive index is temperature independent. anyone has any idea?thank you.

Best Answer

3 As the liquid cools it becomes denser and light bends more, giving a higher refractive index.

I read somewhere recently that there has been a posited "stock crash" since 2000. The premise of the writer was that because some stock indexes - I think the Dow Jones was used - are below their peaks, they have actually crashed in reality, because of the effect of inflation. So, while the media gets excited that an index is near "record highs", it may be that it is in fact 10-15% down since 2000, as this is the amount of inflation in this period. This sounds sensible to me, but... is it correct? What I am not clear in is the composition and calculation of the indexes. Is there something inherent in them that adjusts for or in other way reduces the effect of inflation? So... if an index is at 10,000 right now and we have 10% inflation in the next year, would the index need to be at 11,000 to actually remain at par? Thanks!

Best Answer

You are on the right track. More formally, you are asking about the difference between nominal and real rates of return. The nominal return is the raw or unadjusted increase. The real return is adjusted for the effects of inflation. If an index increases from 10k to 11k, the nominal return is 10%. However, if inflation reduces your purchasing power such that you can buy the same quantity/quality of goods this eyar with 11K that you bought last year with 10k, then the real return on you money is approximately 0%, even though your nominal return is 10%. Mathematically this is operationalized in the the Fisher equation: (1+r)(1+i)=1+R where r is the real return, i is the inflation rate and R is the nominal return. Multiplying this out gives you r+i+r*i=R. Since r*i is usually tiny- especially in the US- it is ignored. Thus, we have r+i=R. Since you always know the nominal return and an estimate of inflation, you can solve for r with r=R-i.

Would a temperature change affect the refractive index and if so, how? Select the best explanation from those shown. a. At higher temperatures, the liquid would evaporate and the refractive index could not be measured accurately. b. No, the refractive index is temperature independent. c. Yes, a decrease in temperature would decrease the refractive index. d. Yes, a decrease in temperature would increase the refractive index.

Best Answer

the first two answers are incorrect answer number one notes the fact that the RI value is wavelength dependant but neglects the fact that it is also temperature dependant and answer number 2 is wrong because it doesn't take in consideration the relationship between RI and Temperature. which is the fact that indexes of refraction and temparture are inversly proportional to one another which means when one goes up the other goes down and vice versa. That is why one must make adjustmments to the RI number when they get it if it wasn't taken at about 20C therefore, letter D should be correct