The study material states: 1) Yield Gap = Dividend Yield - Bond Yield 2) Components of Yield Gap = Equity Risk Premium - Inflation Risk Premium - Expected Inflation - Expected Real Growth in Equity Dividend Now, 3) Bond Yield = Risk Free Rate + Expected Inflation + Inflation Risk Premium 4) Dividend Yield = Risk Free Rate + Expected Real Growth in Equity Dividend + Equity Risk Premium If we substitute equation 3 and 4 in equation 1, we get: Yield Gap = Equity Risk Premium - Inflation Risk Premium - Expected Inflation + Expected Real Growth in Equity Dividend. So, in equation 2, shouldn't the Expected Real Growth in Equity Dividend component be added instead of subtracted? Not sure if I am missing something.
The only thing you are missing is the "corrections" doc which is on the ActEd website. (products / core materials / corrections) The SA7 corrections shows that one of the signs in one of the equations is wrong and explains what it should be.