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Assume that 20year US gov bond yield is 5%, S&P 500 index is $1000, S&P 500 comp cash flows (dividends plus stock buy backs) is
Assume that 20year US gov bond yield is 5%, S&P 500 index is $1000, S&P 500 comp cash flows (dividends plus stock buy backs) is $50 in year 1 and growth rate in cash flows thereafter is assumed to be 3%. What is the implied ERP?
A.4% B.4.5% C.3% D.3.5%
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