Corporate Finance An equity analyst estimates the S&P500 dividends for the next twelve months will be $74. The analyst came up with this estimate by looking at CME dividend futures. Assume a year’s worth of dividends is paid exactly twelve months from now, and that over the next several years the annual growth rate in the dividend yield would be 8%. Assuming that the appropriate risk-free interest rate to use for CAPM is 5.25%, and that the current price of theS&P500 is $5,211, what is the market-implied Equity Risk Premium based on the analyst’s predictions?
Corporate Finance An equity analyst estimates the S&P500 dividends for the next twelve months will be $74. The analyst came up with this estimate by looking at CME dividend futures. Assume a year’s worth of dividends is paid exactly twelve months from now, and that over the next several years the annual growth rate in the dividend yield would be 8%. Assuming that the appropriate risk-free interest rate to use for CAPM is 5.25%, and that the current price of theS&P500 is $5,211, what is the market-implied Equity Risk Premium based on the analyst’s predictions?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An equity analyst estimates the S&P500 dividends for the next twelve months will be $74. The analyst came up with this estimate by looking at CME dividend futures. Assume a year’s worth of dividends is paid exactly twelve months from now, and that over the next several years the annual growth rate in the dividend yield would be 8%. Assuming that the appropriate risk-free interest rate to use for
S&P500 is $5,211, what is the market-implied Equity Risk Premium based on the analyst’s predictions?
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