Question) Strategists have penciled in a 3.2% dividend yield for the S&P/ASX200 (i.e., the Australian equity index) for the next 12 months according to estimates compiled by Bloomberg. If the long-term constant growth rate of the S&P/ASX200 is expected to be 4% and the current risk-free rate is equal to 1%, what is the implied (or current) equity risk premium of the Australian equity index? (2 Marks)

a. 7.2% b. 3.0% c. 2.2% d. 6.2%