Week 5 Discussion Board.docx - Right now is the market risk...

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Right now, is the market risk premium sufficient for you to invest in the stock market? To answer that question: How much do you think the stock market will return over and above the Treasury10-year bond rate? As an investor, is that an important question to answer before you invest in the stock market? Do you think it will return enough to justify the added risk? Do you think this premium will vary for different countries or for the same country over different time spans? Note, when you are calculating the WACC for your company, you will need to answer similar questions. Your text gives you three methods: historical risk premium, surveys of experts, and forward risk premiums. Which method do you prefer and why? What would you do if the three methods varied significantly? These questions seem to be of the black-and-white variety, but your personal investment strategy should be in amazing Technicolor. What I mean by that is, diversity is the key to long term financial independence. When you look as some of the largest brokers in the world, they even use the same type of indicative markets that the individual should use to ensure their short and long-term goals are met. The market risk premium (MRP) reflects the incremental premium required by investors, relative to a risk-free asset like U.S. Treasury bonds, to invest in a globally

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