Is the market risk premium a parameter
Is the market risk premium a parameter, for the world economy or for the national economy?
Expert
No. This risk premium is the return differential (above the return which can be acquired by investing in government bonds) which an investor needs for stock market investment. This is not a characteristic parameter of an economy as everyone has his own risk premium. The average market risk premium value is unknown and this cannot be considered as being the one of a representative investor.
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Please assist with the attached Data Case assignment
I think Free Cash Flow (FCF) can be acquired from the Equity Cash Flow (CFac) using the relation as: FCF = CFac + Interests – ΔD. Is it true?
If the model could not even find bond prices right, how could this hope to accurately value bond options?
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