Exhibit 6-3
Consider the following information concerning stock returns and bond returns over the last 75 years:

-Refer to Exhibit 6-3.Currently,Treasury bills yield 2.50% on the secondary market.What is a good estimate for the return on the stock market in the next year given this information?

Question

Exhibit 6-3
Consider the following information concerning stock returns and bond returns over the last 75 years:
 
-Refer to Exhibit 6-3.Currently,Treasury bills yield 2.50% on the secondary market.What is a good estimate for the return on the stock market in the next year given this information?

Quizplus · Accepted Answer

risk premium = 11.7% - 4.1% = 7.6%
return = T-bill + risk premium = 2.50% + 7.60%

Exhibit 6-3 Consider the Following Information Concerning Stock Returns and Bond Returns