Suppose that over the last 30 years,company ABC has averaged a return of 10%.Over the same period,the Treasury bond rate has averaged 3%.The current estimate of the Treasury bond rate is 5%.Using the historical approach,what is the estimate of ABC's expected return.

Question

Quizplus · Accepted Answer

Historical Risk Premium = 10% - 3% = 7%
Expected Return = 7% + 5% = 12%

Suppose That Over the Last 30 Years,company ABC Has Averaged