Suppose that over the last 25 years,company DEF has averaged a return of 7.5%.Over the same period,the Treasury bond rate has averaged 1.5%.The current estimate of the Treasury bond rate is 4%.Using the historical approach,what is the estimate of DEF's expected return.

Question

Quizplus · Accepted Answer

Historical Risk Premium = 7.5% - 1.5% = 6%
Expected Return = 6% + 4% = 10%

Suppose That Over the Last 25 Years,company DEF Has Averaged