Question: Assume that the consensus required rate of return on common stocks is 14 percent. In addition, you read in Fortune that the expected rate of

Assume that the consensus required rate of return on common stocks is 14 percent. In addition, you read in Fortune that the expected rate of inflation is 5 percent and the estimated long-term real growth rate of the economy is 3 percent. What interest rate would you expect on U.S. government T-bills? What is the approximate risk premium for common stocks implied by these data?

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Nominal rate on Tbills or riskfree rate 1 03 1 05 1 10815 1 0815 or 815 An approx... View full answer

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