3.6 Use the Equity Premium Calculator to estimate the equity premium as of January 16, 2007 with the following data:

S&P 500 forward P/E (next 12 months) 15.0 Consensus 5-year earnings growth rate 10.7%

Consensus long-run expected inflation 2.5%

10-year Treasury note compound yield 4.84%

Expected long-term real growth rate of earnings 2.02%

Current payout rate 31.68%

Long-term dividend payout rate 50.25%

Sources: First Call, Federal Reserve Bank of Philadelphia, and Wall Street Journal