Answered: If the annual geometric mean for the…

If the annual geometric mean for the equity risk premium is 8.4 percent, what percentage of the equity risk premium is consumed by trading costs of 1.2 percent?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section7.4: Valuing Common Stocks

Problem 3ST

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Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

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If the annual geometric mean for the equity risk premium is 8.4 percent, what percentage of the equity risk premium is consumed by trading costs of 1.2 percent?

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