Compute the cost of equity capital for the lodging division using the 30-year treasury (Table B) and the arithmetic average spread between the S&P and long-term government bonds (1926-1987; Exhibit 5) Enter as a percent rounded to two decimals (i.e. X.XX% without the percent sign).

Table B U.S. Government Interest Rates, April 1988
Maturity	Rate
30-year	8.95%
10-year	8.72
1-year	6.90

Exhibit 5 Spreads between S&P 500 Composite Returns and Bond Rates, 1926-1987
	Arithmetic Average	Geometric Average	Standard Deviation
Spread between S&P 500 Composite Returns and Short-Term Treasury Bill Returns
1926-1987	8.47%	6.42%	20.60%
1926-1950	9.89	6.68	27.18
1951-1975	8.20	6.60	13.71
1976-1980	7.01	6.18	14.60
1981-1985	5.17	4.41	14.15
1986	21.31	12.31	17.92
1987	-0.23	-0.23	30.61
Spread between S&P 500 Composite Returns and Long-Term U.S. Government Bond Returns
1926-1987	7.43%	5.63%	20.78%
1926-1950	6.76	3.64	26.94
1951-1975	9.48	8.04	14.35
1976-1980	12.86	12.26	15.58
1981-1985	-2.36	-2.11	13.70
1986	-5.97	-5.97	14.76
1987	7.92	7.92	35.35
Spread between S&P 500 Composite Returns and Long-Term, High-Grade Corporate Bond Returns
1926-1987	6.77%	4.97%	20.31%
1926-1950	6.08	2.92	26.70
1951-1975	8.82	7.40	13.15
1976-1980	12.11	11.56	15.84
1981-1985	-3.47	-3.12	13.59
1986	-1.38	-1.38	14.72
1987	5.50	5.50	34.06