calculate ERP

CFA Level III
#1

Question asks to calculate the expected annual risk premium… But it provides you with the 10 yr avg govt bond yield and the current 10 yr govt bond yield… the correct answer uses the current 10 yr.

How would you know to use the current bond yield instead of the 10 yr average?

#2

Because the current rate is current and the average rate is not

#3

So if it asked for the just the equity risk premium instead of specifying “expected” - would you then use the 10 yr avg?

#4

I would still use current.