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DFA Insurance Company Case Study, Part I: - page 12 / 40

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Initial Conditions

Mean

1111200010

Levels

Table 1: Initial and Mean Interest Rate and Share Assumptions

Variable

Government Yields: 3-Month Interest Rate 1-Year Interest Rate 3-Year Interest Rate 5-Year Interest Rate 10-Year Interest Rate 30-Year Interest Rate

Corporate Yields: 3-Month Interest Rate

1-Year Interest Rate 3-Year Interest Rate 5-Year Interest Rate 10-Year Interest Rate 30-Year Interest Rate

Municipal Yields: 3-Month Interest Rate

1-Year Interest Rate 3-Year Interest Rate 5-Year Interest Rate 10-Year Interest Rate 30-Year Interest Rate

Expected Price Inflation

Expected Real GDP

S&P 500 P/E Ratio

S&P 500 Earnings Growth

S&P 500 Dividend Payout Ratio

6.16%

6.16%

6.70% 6.99% 7.11% 7.28% 7.65%

7.65%

3.91%

3.91%

4.09% 4.54% 4.79% 5.22% 5.99%

5.99%

    • 5.53

      %

    • 6.19

      %

    • 6.34

      %

    • 6.39

      %

    • 6.36

      %

    • 6.56

      %

5.53%

6.56%

2.5%

2.5%

2.5%

2.5%

32

32

9.0%

40%

40%

The returns for cash equivalents, bonds and common stock are directly controlled by the initial and mean assumptions shown in Table 1.

~ Source: Bloomberg

70

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