# Since 1955 treasury bond yields and earnings yields

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7. Since 1955, Treasury bond yields and earnings yields on stocks were _______.A. identicalB. negatively correlatedC. positively correlatedD. uncorrelatedThe earnings yield on stocks equals the expected real rate of return on the stock market, whichshould be equal to the yield to maturity on Treasury bonds plus a risk premium, which maychange slowly over time. The yields are plotted in Figure 18.8.
Difficulty: Easy8. Historically, P/E ratios have tended to be _________.
Difficulty: Easy
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Chapter 10 / Exercise 8
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Chapter 18 - Equity Valuation Models9. The ______ is a common term for the market consensus value of the required return on astock.
Difficulty: Easy18-5
10. The _________ is the fraction of earnings reinvested in the firm.
Difficulty: Easy11. The Gordon modelA. is a generalization of the perpetuity formula to cover the case of a growing perpetuity.B. is valid only when g is less than k.C. is valid only when k is less than g.D. A and B.E. A and C.The Gordon model assumes constant growth indefinitely. Mathematically, g must be less thank; otherwise, the intrinsic value is undefined.
Difficulty: Easy
Chapter 18 - Equity Valuation Models12. You wish to earn a return of 13% on each of two stocks, X and Y. Stock X is expected topay a dividend of \$3 in the upcoming year while Stock Y is expected to pay a dividend of \$4in the upcoming year. The expected growth rate of dividends for both stocks is 7%. Theintrinsic value of stock X ______.
Difficulty: Easy18-7

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Dividend yield, P E ratio, Equity Valuation Models
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Chapter 10 / Exercise 8
Entrepreneurial Finance
Leach/Melicher
Expert Verified