Calculate the equity premium Calculate the equity premium given:. Stock market return: 12.5%Corporate bond return: 8.2%⚫ T-bill rate: 4.1%⚫ Inflation: 2.8%

The question requires the determination of the equity premium. Equity risk premium is the excess…

Answered: Calculate the equity premium given: .…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Similar questions

Assume the following Risk Premiums: DRP ? LP = 0.25% MRP =1.15% 10-year Government bonds yield 4.65% 10-year corporate bonds yield 6.75%. What is the default risk premium on corporate bonds?
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If the annual geometric mean for the equity risk premium is 8.4 percent, what percentage of the equity risk premium is consumed by trading costs of 1.2 percent?
5-year Treasury bonds yield 3.6%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year bonds is 0.4%. What is the real risk-free rate, r*?
The risk-free rate on long-term Treasury bonds is 6.04%. Assume thatthe market risk premium is 5%. What is the required return on the market? Now use the SML equation to calculate the two companies’ requiredreturns.
Calculate the annual interest (in $) and current yield (as a %) of the bond. (Round your percentage to one decimal place.) Company Coupon Rate Annual Interest Company 5 8.25% +A Market Price 104.00 Current Yield %
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Consider a 1-year treasury bill that currently earns 3.25%. The increase in rates for the above bill is shown as follows: Year Increase in rate 1 year from now 3.6% 2 years from now 3.85% The liquidity premium is as follows: 2-year securities 3-year securities 0.07% 0.15% Assume that if the liquidity premium theory is correct. Calculate the current rate on 3-year Treasury securities.
Using the table below, Compute the convexity measure (in years) for bond 2 Bond 1 Bond 2 Coupon Yield to maturity Maturity (in years) Par value 6% 7% 6% 6% 4 $100 $100 $100 $108 Price O A. 14.763 12.652 OC. 13.312 OD. 13.927
The following table showing the cash flows for TIPS bonds. Inflation in Year Just Ended Time 0123 2.25% 5.00 3.50 Par Value $ 1,000.00 1,022.50 1,073.63 1,111.20 Coupon Payment + Principal Repayment = $ 46.01 $0 0 48.31 50.00 1,111.20 Required: a. What is the nominal rate of return on the bond in year 2? If real rate of return is 4.50% per annum b. What is the real rate of return in year 2? c. What is the nominal rate of return on the bond in year 3? d. What is the real rate of return in year 3? Total Payment $46.01 48.31 1,161.21
what is the cost of Equity of KDP? Beta: 68 market risk premium:5.08% 3 month treasury yield: 5.34 % 10 year treasury yield: 4.27%
Consider the following bonds: Bond A B CD с Coupon Rate (annual payments) 0.0% 0.0% 4.3% 7.7% The percentage change in the price of bond A is |___%. (Round to one decimal place.) What is the percentage change in the price of each bond if its yield to maturity falls from 6.9% to 5.9%? The percentage change in the price of bond B is %. (Round to one decimal place.) Maturity (years) 15 The percentage change in the price of bond C is %. (Round to one decimal place.) The percentage change in the price of bond D is %. 21500

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Calculate the equity premium given: . Stock market return: 12.5% Corporate bond return: 8.2% ⚫ T-bill rate: 4.1% ⚫ Inflation: 2.8%