An online publication that has important information on asset allocation and portfolio concepts is Efficient Frontier. Whenever one investigates valuation of securities and the relationship between risk and return, one is faced with the challenge of estimating the "equity risk premium." In "The Expected Return One-Step"(Links to an external site.)Links to an external site. William Bernstein presents a compelling argument based on economics for estimating the appropriate long-term equity premium. After reading the short article by Bernstein, answer the following questions:

1. According to Jim Bianco of Bianco Research, what is the primary determinant of long-run bond yields? When will it make sense for corporations to borrow funds?
2. According to Bernstein, what is the best estimate of the equity risk premium for common stock over the long run? Discuss the rationale presented for his conclusion.

WEBSITE : http://www.efficientfrontier.com/ef/401/onestep.htm