3.3 Consider the following data on the S&P 500 index on October 14, 1987, just before the...

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3.3 Consider the following data on the S&P 500 index on October 14, 1987, just before the crash of 1987:

Index 305.2 P/E 21.2 Dividend yield 2.9%

Payout 61.4%

Beta 1.0 Equity premium over long Treasury rate 4.0%

In addition, the long-term Treasury bond rate was 9%, and the consensus forecast of long-term inflation was 4.5% per annum.

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