Question 1 The estimated earnings yield and dividend yield of the stock market are 4% and 1.5%, respectively, the yield on 10-year Treasury bonds is 3%, and the yield on Moodys' A rated bond yield is 4.5%, the consensus long-term SP500 earnings growth rate forecast is 15%. The market confidence adjustment factor is 0.10. Given these expectations, would you shift your money from the stock market into the less risky T-bonds? This model is called what? YES, shift money from the stock market into T-bonds; Fed Model NO, stay with the stock market; Yardeni Model Need more information on T-bill return and optimal interest rate; Tylor Model NO, stay with the stock market; FCFF model.
Question 1 The estimated earnings yield and dividend yield of the stock market are 4% and 1.5%, respectively, the yield on 10-year Treasury bonds is 3%, and the yield on Moodys' A rated bond yield is 4.5%, the consensus long-term SP500 earnings growth rate forecast is 15%. The market confidence adjustment factor is 0.10. Given these expectations, would you shift your money from the stock market into the less risky T-bonds? This model is called what? YES, shift money from the stock market into T-bonds; Fed Model NO, stay with the stock market; Yardeni Model Need more information on T-bill return and optimal interest rate; Tylor Model NO, stay with the stock market; FCFF model.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Question 1
The estimated earnings yield and dividend yield of the stock market are 4% and
1.5%, respectively, the yield on 10-year Treasury bonds is 3%, and the yield on
Moodys' A rated bond yield is 4.5%, the consensus long-term SP500 earnings
growth rate forecast is 15%. The market confidence adjustment factor is 0.10.
Given these expectations, would you shift your money from the stock market into
the less risky T-bonds? This model is called what?
a. YES, shift money from the stock market into T-bonds; Fed Model
b. NO, stay with the stock market; Yardeni Model
c. Need more information on T-bill return and optimal interest rate; Tylor Model
d. NO, stay with the stock market; FCFF model.
Question 2
Assume that for a country KROW, its inflation is expected to growth by 4%, its
population is expected to grow by 2% and labor force participation is expected
to grow by 0.25%. The government budget deficit will grow by 4%. If the
spending on new capital inputs is projected to grow at 2.5% and total
productivity will grow by 0.5%, what is the projected economic growth rate?
a. 9.25%
b. 5%
c. 5.25%
d. 13.25%
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