Suppose that over the last 20 years,company XYZ has averaged a return of 13%.Over the same period,the Treasury bond rate has averaged 4%.The current estimate of the Treasury bond rate is 6.5%.Using the historical approach,what is the estimate of XYZ's expected return.

Question

Quizplus · Accepted Answer

Historical Risk Premium = 13% - 4% = 9%
Expected Return = 9% + 6.5% = 15.5%

Suppose That Over the Last 20 Years,company XYZ Has Averaged