11.4. Assuming that historical data suggests that the market risk premium is 8.4 percent per year and
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11.4. Assuming that historical data suggests that the market risk premium is 8.4 percent per year and the market standard deviation is 40 percent per year, find the certainty equivalent of the year 1 cash flow. What are the advantages and disadvantages of using such historical data for market inputs as opposed to inputs from a set of scenarios, like those given in the table above exercise 11.2?
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Financial Markets And Corporate Strategy
ISBN: 9780071157612
2nd Edition
Authors: Mark Grinblatt, Sheridan Titman
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