Which of the Following Statements Regarding Estimating an Equity Premium

question 55

Multiple Choice

Which of the following statements regarding estimating an equity premium is false?

• A)The S&P 500 Index is commonly used to proxy for the market portfolio when using historical data to estimate an equity premium.
• B)If you are evaluating long-term projects, you should use the yield on a long-term Treasury bond as the risk-free rate in the equity premium equation.
• C)You should estimate an equity premium for each project you are evaluating.
• D)All of the above are true statements.

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Definitions:

Satiety

The state of being satisfied; fullness.

James And Lange

Theorists who proposed an emotion theory suggesting physiological arousal precedes the experience of emotion.

Cognitive Representations

Mental models or mental images that individuals form about objects, events, or people, based on their knowledge and experiences, which guide their interactions with the external world.

Physiological Responses

The body's automatic reactions to a stimulus, including changes in heart rate, breathing, and muscle tension, among others.