Warranted by the fundamentals

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Reference no: EM131948943

If Professor Siegel is correct that stocks are less risky than bonds, then the risk premium on stock may be zero. Assuming that the risk-free interest rate is 4 percent, the growth rate of dividends is 3.5 percent and the current level of dividends is $22, use the dividend-discount model to compute the level of the S&P 500 that is warranted by the fundamentals.

Reference no: EM131948943

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