Homework Throughout the 1990s, the equity premium fell considerably especially in the USA. One conceivable reason for that change is a decrease in investors' required rates of return. What elements and dynamics may have led to a drop in the required rate of return during the 1990s

Homework Throughout the 1990s, the equity premium fell considerably especially in the USA. One conceivable reason for that change is a decrease in investors' required rates of return. What elements and dynamics may have led to a drop in the required rate of return during the 1990s

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter1: Multinational Financial Management: An Overview

Section: Chapter Questions

Problem 28QA

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Concept explainers

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.

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Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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Throughout the 1990s, the equity premium fell considerably especially in the USA. One conceivable reason for that change is a decrease in investors’ required rates of return. 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. '' i only need the answers of d,e and f please ''
Throughout the 1990s, the equity premium fell considerably especially in the USA. One conceivable reason for that change is a decrease in investors’ required rates of return.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 thoughtfullywhy investors expecting above-average returns in the future may be disappointed.
Throughout the 1990s, the equity premium fell considerably especially in the USA. One conceivable reason for that change is a decrease in investors’ required rates of return. Explain carefully how and why a decline in the required rate of return affects stock values and returns.
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