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Drupady [299]
3 years ago
14

The difference between average annual returns on common stocks and returns on long-term government bonds is called a:___________

_
Business
1 answer:
Anestetic [448]3 years ago
3 0

Answer:

Market risk premium.

Explanation:

The difference between average annual returns on common stocks and returns on long-term government bonds is called a market risk premium.

Basically, market risk premium is typically determined by taking the slope of a security market line (SML); which is used by economist as a graphical representation of the capital asset pricing model (CAPM).

Market premium risk is used to determine the quantitative measure of the extra return demanded by market participants for the increased risk.

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"The answer is $106".

After tax cost of debt               6%
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Tax sav from dep                   640
cost of owning       0               1
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maintence                                 -240
maintenece saving                     96
Depn tax saving                          640
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PV cost of owning (6%)             -3474
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Tax savings from lease                840
net cash cost                           -1260
PV cost lease 6%                     -3368
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