Final answer:
The average annual nominal rate of return on U.S. common stocks from 1900 to 2017 is likely greater than 11%, with historical data showing dividends and capital gains on the S&P 500 index typically exceeding this rate.
Step-by-step explanation:
The question asks about the average annual nominal rate of return on a portfolio of U.S. common stocks over a long historical period from 1900 to 2017. To estimate this long-term return, we can look at the more recent performance of stocks to get a sense of how they've done over time. Particularly, we can analyze the data from the S&P 500 index provided in various tables that show total annual return, which is the sum of dividends and capital gains.
Considering the information, it's clear that the 1950s to the 1980s had dividends around 4%, but since the 1990s dividends have fallen to about 1% to 2%. Capital gains have often been the larger component of total return, especially in the 1980s and 1990s. Over the long term, stocks tend to have returns higher than other investment vehicles such as bonds or savings accounts, due to their higher risk. This historical perspective implies that the average annual nominal rate of return on common stocks is likely greater than 11%, as the capital gains and dividends together usually exceed this threshold.