The Feds stock valuation model says that the earnings/price ratio E/P is related to the interest rate

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The Fed’s stock valuation model says that the earnings/price ratio E/P is related to the interest rate R on 10-year Treasury bonds. Suppose that this relationship is described by the equation E/P = 1:2+0:8R.

a. What is the earnings/price ratio when the interest rate is 0?

b. How much does the earnings/price ratio increase when the interest rate increases by 1?

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Essential Statistics Regression And Econometrics

ISBN: 9780123822215

1st Edition

Authors: Gary Smith

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Question Posted: Mar 16, 2024 12:00 PM

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The Feds stock valuation model says that the earnings/price ratio E/P is related to the interest rate

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Essential Statistics Regression And Econometrics

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