7 + 0 + 4.1 + 3.3 - [(13.2 - 13.5) / 13.5] = 10.1% - 2.2% = 7.9% M...
1.7 + 1.0 + 4.1 + 3.3 - [(13.2 - 13.5) / 13.5] = 10.1% - 2.2% = 7.9% Making the equity risk premium: 7.9 - 4.8 = 3.1% Candidate discussion: 1 point to set up the GK calculation and 1 point each for the two correct numbers requested. (Study Session 7, LOS 14.b, c) McFalls sees the variations in estimated equity return produced by various models as an opportunity and decides to use business cycle analysis to gage the relative attractiveness of the equity market. He gathers economic data for the last four years with year 4 the oldest data and year 1 the most recent.