Use the dividend-discount model to compute the level of the, Financial Management

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Use the dividend-discount model to compute the level of the

If Professor Siegel is correct that stocks are less risky than bonds, then the risk premium on stock may be zero. Assuming that the risk-free interest rate is 4 percent, the growth rate of dividends is 3.5 percent and the current level of dividends is $22, use the dividend-discount model to compute the level of the S&P 500 that is warranted by the fundamentals.

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