1. Current stock prices reflect
investors' confidence in the current economy
investors' confidence in the current administration
investors' expectations of the future
investors' attitudes about the past market
2. Assume that the dividend payout ratio on the S&P 500 will be 40 percent when the rate on long-term government bonds falls to 9 percent. Investors being risk averse demand an equity risk premium of 8 percent. If the growth rate of dividends is expected to be 10 percent, what will be the price of the market index if the earnings expectation is $30?
$384.00
$213.44
$266.56
$171.43