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

The equity premium is calculated as the difference between the stock market return and a baseline…

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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Consider the following average annual returns: Investment Average Return 23.4% Small Stocks S&P 500 13.7% 7.4% Corporate Bonds Treasure Bonds Treasury Bills What is the excess return for corporate bonds? O A. 0% B. 3.1% C. 6.2% O D. 1.6% 6.1% 4.3%
Assume that the risk-free rate (i.e., Rf) is 2.8%. If, for a particular company bond issue, the default risk premium (i.e., DP) is 3.1%, the maturity risk premium ( i.e., MP) is 0.9%, and the market risk premium ( i.e., MRP) for that company's stock is 12.9% what is the required rate of return for the company's fixed income securities ? Record your answer as a percent , rounded to one decimal place , but do not include a percent sign in your answer . For example , enter 0.1578658 = 15.78625% as 15.8 .
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?
Calculate WACC from following data. Risk free rate 1.63% total debt $78.93 billion Market Cap $2580 billion Beta 0.86 Corporate Bond rate 3.10% CAPM S&P historical return 5.90% Tax Rate 21% please show steps
Consider the following average annual returns: Average Return 23.4% 13.4% 7% 6.4% 4.7% Investment Small Stocks S&P 500 Corporate Bonds Treasure Bonds Treasury Bills What is the excess return for the portfolio of small stocks? O A. 16.8% OB. 15.9% O C. 18.7% OD. 11.2%
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The maturity risk premium for Vonda bonds are 3%, default risk premium for Vonda bonds are 4%, and the liquidity risk premium for Vonda bonds are 2%. The real rate of return is 3% and the inflation premium is 3%. What is the nominal rate of return?
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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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*?
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?

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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%