Calculate the equity premium on the following set of data: Stock market return 10.2% Corporate bond return 7.1% Short-term t bills 3.7% Inflation 2.2% a. 6.50% b. 8% c. 7.83% d. 6.27%
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- Calculate Cost of Common Equity using CAPM (Capital Asset Pricing Model), DCF (Discounted Cash Flow Model) and Bond Yield Risk Premium CAPM data: VEC’s beta = 1.2 The yield on T-bonds = 3% Market risk premium = 7% DCF data: Stock price = $27.08 Last year’s dividend (D0) = $2.10 Expected dividend growth rate = 4% Bond-yield-plus-risk-premium data: Risk premium = 5.5% Amount of retained earnings available = $80,000 Floatation cost for newly issued shares = 7%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%Consider the following information from 2017. Item T-bills Return 3.6% Corporate bonds 4.7% Stocks Inflation 7.3% 1.6% What is closest to the real return on corporate bonds? 1% 2% 3% 4%
- Assume these are the stock market and Treasury bill returns for a 5-year period: T-Bill Return Year Stock Market Return (8) (8) 2016 32.50 0.07 2017 11.80 0.07 2018 -2.40 0.07 2019 13.70 0.25 2020 22.40 0.27 Required: a. What was the risk premium on common stock in each year? b. What was the average risk premium? c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) Complete this question by entering your answers in the tabs below. Required A Required B Required C What was the risk premium on common stock in each year? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Negative values should be entered with a negative sign.. Year Risk Premium 2016 % 2017 % 2018 % 2019 % 2020 %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%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 .
- need answer in step by stepSelected information for Berry Company is as follows: Berrys return on equity rounded to the nearest percentage point is: a. 20%. c. 28%. b. 21%. d. 40%.Assume these are the stock market and Treasury bill returns for a 5-year period: Stock Market T-Bill Return Return (%) (%) 0.14 Year 2013 34.20 2014 13.90 0.14 2015 -3.80 0.14 2016 14.80 0.09 2017 24.30 0.11 Required: a. What was the risk premium on common stock in each year? b. What was the average risk premium? c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) Complete this question by entering your answers in the tabs below. Required A Required B Required C What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Standard deviation %
