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Which One of These Will Produce an Acceptable Estimate of the Value

Question 18

Multiple Choice

Which one of these will produce an acceptable estimate of the value of the market risk premium?


A) Historical rate of return on a market index
B) Average rate of return on the S&P 500 plus the risk-free rate
C) Dividend yield of the S&P 500 + Consensus forecast of future dividend growth - U.S.Treasury bill rate
D) Total dividends paid by the S&P 500 firms for a 1-year period divided by the U.S.Treasury bill rate
E) Rate computed using the CAPM and a beta of 1

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