Question
Analyst forecasts a 2.25 percent dividend yield on Canadian equities, based on the S&P/Toronto Stock Exchange Composite Index and a repurchase yield of 1 percent.
Analyst forecasts a 2.25 percent dividend yield on Canadian equities, based on the S&P/Toronto Stock Exchange Composite Index and a repurchase yield of 1 percent. He forecasts the long-run inflation rate at 2 percent per year, and a real earnings growth of 4 percent, based on a 1-percentage-point premium for corporate growth over his expected Canadian GDP growth rate of 3.0 percent. He also forecasts a very minor expansion in P/E multiples of 0.25 percent. Based upon these figures, what is the expected return on Canadian equities in the next year?
Select one:
a. 7.5%
b. 11.5%
c. 9.5%
d. 10.5%
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