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Understanding Compensation Awards and Real Returns: An Economic Analysis

This presentation by Colm McCarthy of DKM Economic Consultants, dated March 26, 2002, dives into critical aspects of compensation awards and real returns. It discusses topics such as the real rate of return, historical records, index-linked yields, and the equity premium over bonds. With insights into long-term returns and the role of index-linked investments in portfolio management, this analysis provides essential information for navigating economic decisions. The presentation also emphasizes the importance of structured settlements in financial planning.

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Understanding Compensation Awards and Real Returns: An Economic Analysis

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  1. E C O N O M I C C O N S U L T A N T S K M March 26th, 2002 Compensation Awards and Real Returns Presentation by Colm Mc Carthy DKM Economic Consultants 1

  2. Introduction • The Real Rate - 4% or 2.5%? • What the Record Shows • Index-Linked Yields • The Ex-Ante Equity Premium

  3. Range Real Return on Equities Real Equity Premium over Bonds 6 – 7% 25 10 7 – 8% 20 21 8 – 9% 6 7 9 – 10% 4 7 10 – 11% 4 7 11 – 12% 1 2 12% + nil nil Total 120 120

  4. Continued…..

  5. Table 8: Real Yields on French Treasury Index-Linked Bonds Maturity Date Real Yield % 2009 3.48 3.68 2029 Source: Bloomberg

  6. Summary • Where Lies the Onus of Proof? • Long-Term Return as Low as 2.5% is Unprecedented • Index-Linked Have a Role in Prudent Portfolios • UK Situation Exceptional • Case for Structured Settlements

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