Assume that the S&P 500 had earnings in the past year of $210 and expected earnings for next year are $228. The 10-year UST yield is 2.95%. If the S&P 500 is currently trading at 4,177, is the market currently undervalued or overvalued relative to the Fed model and by how much (in percentage terms based on the Fed model)? In other words, is the market higher or lower than the Fed model and how much below (or above) the Fed model (as a percentage of the Fed model)?

Answer rating: 100% (QA)

To assess whether the market is currently undervalued or overvalued relative to the Fed model we nee... View the full answer