--%>

Is the market risk premium a parameter

Is the market risk premium a parameter, for the world economy or for the national economy?

E

Expert

Verified

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.

   Related Questions in Corporate Finance

  • Q : Problem regarding purchasing machine

    Alger Corp needs to buy some construction equipment for $50,000 that has a helpful life of 4 years with no salvage value. The Alger utilizes straight-line depreciation. Alger contains a tax rate of 30%, and it employs a discount rate of 10%. The equipment will produce

  • Q : What are Stock exchanges Stock

    Stock exchanges: A stock exchange provides services useful for trading, issue and redemption of shares and other securities for traders and brokers. They will also provide facility for payment of income and dividends for listed securities. Securities

  • Q : Is the market risk premium a parameter

    Is the market risk premium a parameter, for the world economy or for the national economy?

  • Q : Does the equity of shareholders have

    Does the equity of shareholders represents the savings a company has accumulated by the years?

  • Q : DCF Analysis AB Corp. is in the

    AB Corp. is in the business of making white-board markers. They are computing the potential of investing in some new equipment that will enhance their manufacturing process.  The initial cost of the latest machinery is $470,000 plus a one-time installation cost o

  • Q : Problem on financial manager

    Assume that you are a financial manager of Yuen Cheong Manufacturng Company. Due to the rising demand of product X, Yuen Cheong Manufacturng Company decides to open a new production plant in China, so it needs to take a loan of US$1 million. Bank A offers Yuen Cheong

  • Q : Determine the future value What would

    What would the future value after 5 years of $100 be at 10% compound interest?

  • Q : When the dividend shows real money The

    The dividend is the part of the net income which the company distributes to shareholders. When the dividend shows real money, the net income is also real money. Is it true?

  • Q : Which currency is utilized in an

    Which currency has to be utilized in an international acquisition in order to compute the flows?

  • Q : Calculate the risk-free rate You have

    You have been given the following information on two corporations; you are to assume that thesecurities are correctly priced. My Corp, Inc. has a Beta of 1.25 and an Expected Return of .145;Your Corp, Inc. has a Beta of .75 and an Expected Return of .095. Based on the