Average of historical market risk premium

Assignment Help Business Economics
Reference no: EM133227556

Question

We used the average of historical market risk premium (4%) as a proxy for the expected market risk premium. How valid is that assumption? If you are asked to select one from the lower bound (3%), the upper bound (5%), and the average (4%), which one is more appropriate for the current economy? An important factor to consider is the new variants of Covid-19. How did Covid-19 outbreak in 2020 affect investors' expected return? (E.g., do you think that investors became more risk averse or less risk averse?) If investors believe that the Omicron wave is receding, how does that affect investors' expected return? Use your choice of market risk premium to re-estimate the cost of capital.

Reference no: EM133227556

Questions Cloud

Weight of preferred stock and weight of debt : Calculate the following: weight of equity, weight of preferred stock and weight of debt. Calculate the weighted average cost of capital (WACC).
Calculate the total free cash flow : Calculate the total Free Cash Flow every year from Year 1 to Year 4. Should Paprika replace the old machine with the new machine? Explain
Long-term and spot markets : Suppose the company is willing to use both the long-term and the spot markets. Suppose the company is willing to use both the long-term and the spot markets.
Investing risk : Explain why you feel this happens and provide specific reasons for both type of investors.
Average of historical market risk premium : We used the average of historical market risk premium. How does that affect investors'expected return?
Permanently disabled for superannuation purposes : Harvey is injured at work and permanently disabled for superannuation purposes.
Calculate the company weighted average costs of capital : Calculate Vendata Resources' component costs. Calculate the company's weighted average costs of capital.
Capital asset pricing model with Fama-French 3-factor model : Compare the capital asset pricing model with the Fama-French (FF) 3-factor model. Describe the function and impact of each risk factor.
Regarding margin accounts for long positions : Which of the following statements is NOT true regarding margin accounts for long positions? what date in February will the shares start trading ex-dividend?

Reviews

Write a Review

Business Economics Questions & Answers

  Draw representative supply and demand curves

Consider the market for automobiles, and draw representative supply and demand curves. Suppose that the price of gasoline rises, and at the same time, the price of steel (an input to automobile production) falls. Show this on your graph. If you have ..

  Economic slowdown in the country and region

Given your economic knowledge, is the advice given by the marketing manager appropriate? Explain your intuition.

  Predicted to earn based on the first estimate

1. Suppose that a least squares regression yields the following estimate: Wi = -1 + 0.3Ai where W is the hourly wage rate (in dollars) and A is the age

  Based on the harrod-domar growth model

During the past decade, India has invested about 22% of its GDP while China's investment rate has been double than that of India's, India's annual growth rate has been about 6 while that of China has been about 9%. Based on the Harrod-Domar Growth mo..

  Explain the difference between 2 values

Can you explain the difference between 2 values, 3 values and 4 values per point? This is really confusing.

  What is fixed cost in particular example

Assume the following short-run cost function =100+10 +5 2.C=100+10Q+5Q2.

  Focusing on the nature of club goods and/or public goods

Explain the advantages and disadvantages of toll roads compared to toll-free roads by focusing on the nature of club goods and/or public goods.

  Cause an increase in employment in unionized occupation

Explain and demonstrate (graph) how a union might cause an increase in employment in the unionized occupation. Also, explain and demonstrate (graph) how this might, in this case, affect wages in related non-unionized occupations.

  What is the best time period for analysis

Machine A costs $20,000 to purchase and is worth $5,000 in 6 years. Machine B costs $10,000 to purchase and is worth $2,000 in 4 years. Assume that these machines are needed for 24 years and can be repurchased at the same price in the future. (use 10..

  Explain how price supply and demand are equal

Using graphing function on TI-83/84 Explain how price supply and demand are equal. At this price, explain how many tickets will be supplied and sold.

  Build phones on windows mobile

-Launched in June 2007, Apple's iPhone quickly grabbed a substantial share of the worldwide market for smart phones. Competing phones and operating systems incl

  Building a system from the ground up

Your manager just asked you to join a meeting in progress to speak for five minutes about a build versus buy decision the company is about to make. Describe how you would spend those five minutes in presenting the most important element of the dec..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd