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What is the market risk premium-equity risk premium

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Reference no: EM131904182

1. Smith Inc stock has an expected return of 15%, a beta of 1.5 and is in equilibrium. Assume the nominal risk-free rate is 4.00% (A) What is the market risk premium? (B) What is the equity risk premium?

2. Consider an exchange-traded call option contract to buy 500 shares with a strike price of $40 and maturity in four months. Explain how the terms of the option contract change when there is

A-A 10% stock dividend

B-A 10% cash dividend

C-A 4-for-1 stock split

Reference no: EM131904182

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