External Forces That Expect The Risk Of The Stock Market

Risk free rate is taken to be 4.69% while the market risk premium is 5.01%.

Midland’s choice of market risk premium of 5% does appear to be an appropriate selection in this instance. From exhibit 6, we found that this EMRP is lower than the historical data of U.S. stock returns minus Treasury bond yields and is higher than the market risk premium from the survey results. So we recommend that the risk premium rate can be narrowed between 4.8% to 5.6%. 4.8% is the lowest of higher EMRP while 5.6% is the highest of the lower EMRP. In a word, our team think that 5% is a reasonable market risk premium.

-The nation’s GDP is a good measure of its economic well being and progress because it represents the total value of all goods and services produced in an economy, and what a country produces and what it consumes are nearly identical.

According to Aswath Damodaran equity risk premium in the US in 1979 was 6.45%, thus

3. A 2 – year Treasury security currently earns 5.13%. Over the next 2 years, the real

GDP is the calculation of the total goods and services produced in one year. It measures the economy's size and compares how the economy performs in other countries. GDP is measured in three different ways, as the value of goods and services produced, as domestically produced goods and services spending, and as a factor income from firms. With the value of goods and services produced, GDP is calculated by adding the goods and

Gross Domestic Product or GDP, represents all the goods and services produced within a country’s borders. Measurement of gross domestic products is based on consumption, government spending (at all levels of government), investment, and exports minus imports. The formula for GDP is C + G + I + (X – M). (Colorado Technical University [CTU], 2016). According to the given information the formula for Country A the GDP would be

Also in exhibit 3, the average annual return of the 10-year Treasury bond during the same time period is 5.28%. Therefore, the spread between the average market return and the risk-free rate, or the equity market risk premium is 6.37%.

Hence, with a payout ratio target of 4.75%, we would get an Expected Return of 6.25%:

As interest rate on a three-month US Treasury bill is used as the risk free rate, this rate is obtained from Bloomberg is 0.05% (Bloomberg, Oct 2015).

SanDisk Corporation is a public listed company and its stocks are listed on NASDAQ in US with stock name of SNDK. As this is US company so the equity market risk premium is 5.5%. Here we can also calculate expected rate of return which is

Measuring GDP will give the county a good idea of its economic performance. This will help the government assess the current economic activity and standard of living. Therefore a rise in GDP will suggest better living standards, increased economic activity that would generate more jobs leading to individuals having more disposable income to spend on things. Increased spending in the economy would give business more confidence to increase their investments, which benefits future growth. Rising GDP would mean better public services are offered like improvements in the field of education, better healthcare and national security. On the other hand if GDP increases rapidly then it could also have a negative effect on the economy. Increasing GDP would lead to higher inflation as people are purchasing more products then there is an incentive to increase prices. This would further have pressure on interest rates to rise, leading to a decrease in competitiveness both in the domestic and international markets. As nominal prices rise, real wages have to rise in accordance for people to afford products and this leads to rise in unemployment. Also in places like China rise in GDP has been associated with a rise in pollution levels from factories which can have a

The economic forecasting staff for Merrill Finch developed probability estimates for the state of the economy, and the security analysts have developed software to estimate the rate of return on each of these alternatives under each state of the economy. A chart showing the results of the analysis is in Appendix A of this report.

In earlier times Gross Domestic Product was one of the main indicators to measure a country’s wealth. Gross Domestic Product (GDP) is defined as the total value of all the goods and services produced by a nation in any given year ("Is the Gross Domestic Product (GDP) a Good Measure of Prosperity?"). There are two ways of calculating a country’s GDP. The first is the income approach which is calculated by adding the wages of workers, income from rent, interest and profits. The second, more common form of calculating GDP, is the expenditure approach. Here GDP totals consumption expenditure, investment, government spending and net exports. GDP statistics are considered to reflect a county’s economic output which could possibly lead to growth. However GDP is a measure of income and it should not be confused with wealth. Which is why most modern economists do not consider GDP to be a good measure of a

per our assumptions, our equity risk premium4 is 6.5%. Our Risk Free rate (Rf) is