One of the major advantages of using estimates of the market risk premium,based upon long- term average returns on equities in excess of bond rates,is that it does not require the assumption that the market risk premium remains constant over time.

Question

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Using long-term average returns to estimate the market risk premium inherently assumes that historical patterns will continue into the future, which indirectly assumes some level of constancy in the market risk premium over time.

One of the Major Advantages of Using Estimates of the Market