Scribd Logo
Upload

Welcome to Scribd!

  • 16 views

    Review Questions - Week 3

    Uploaded by

    fiona chen
    This document contains review questions about the equity premium from week 3 class. It discusses how a higher discount rate would make the current cash flow constant but future cash flows higher, leading to a higher stock price. It also notes that a lower risk environment means lower discount rates and a higher bond price. The document suggests that if the equity premium is expected to go down, the strategy would be to buy bonds and sell stocks.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content

    You might also like

    Review Questions - Week 3

    Uploaded by

    fiona chen
    16 views4 pages
    This document contains review questions about the equity premium from week 3 class. It discusses how a higher discount rate would make the current cash flow constant but future cash flows higher, leading to a higher stock price. It also notes that a lower risk environment means lower discount rates and a higher bond price. The document suggests that if the equity premium is expected to go down, the strategy would be to buy bonds and sell stocks.

    Original Description:

    Original Title

    Review Questions _Week 3_

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    This document contains review questions about the equity premium from week 3 class. It discusses how a higher discount rate would make the current cash flow constant but future cash flows higher, leading to a higher stock price. It also notes that a lower risk environment means lower discount rates and a higher bond price. The document suggests that if the equity premium is expected to go down, the strategy would be to buy bonds and sell stocks.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    16 views4 pages

    Review Questions - Week 3

    Uploaded by

    fiona chen
    This document contains review questions about the equity premium from week 3 class. It discusses how a higher discount rate would make the current cash flow constant but future cash flows higher, leading to a higher stock price. It also notes that a lower risk environment means lower discount rates and a higher bond price. The document suggests that if the equity premium is expected to go down, the strategy would be to buy bonds and sell stocks.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 4

    Week 3 Review Questions (Equity Premium I)

    1
    2. discount rate is higher -> current CF constant, future CF higher -> A
    3. D -> lower risk = lower discount rates = higher price
    4. expect premium to go down -> price go up -> buy bond and sell stocks -> C
    5. low real estate price -> high cap rate ->
    High bond price
    Higher P/E ratio -> C

    2
    Week 3 Review Questions (Equity Premium I)

    3
    4

    You might also like