a) What is the equity premium? Explain in detail based on the class discussion. b) What is the required rate of return? Explain in detail based on the class discussion.
Throughout the 1990s, the equity premium fell considerably especially in the USA. One conceivable reason for that change is a decrease in investors’ required
a) What is the equity premium? Explain in detail based on the class discussion.
b) What is the required rate of return? Explain in detail based on the class discussion.
c) What elements and dynamics may have led to a drop in the required rate of return during the 1990s?
Discuss in detail.
d) Explain vigilantly how these factors lead to declining equity premiums.
e) Explain carefully how and why a decline in the required rate of return affects stock values and returns.
f) If above average returns during the late 90s were due to declining equity premiums, explain thoughtfully
why investors expecting above-average returns in the future may be disappointed.
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