K
Keyser
Member
In part (ii) the solution talks about how the GRY of bonds and the dividend/earnings yield of equities are used in the calculation of the valuation interest rate.
The solution says that equities bring down the overall yield of the fund. I presume this is from GRY of Bonds being higher than the dividend yield of equities because the dividend yield does not allow for the high expected, but uncertain, capital growth in equities.
I thought that the equity earnings yield; earnings per share/price, is generally higher than the GRY of bonds. So the above would not hold for earnings yield, like it does for dividend yield.
Have I picked something up wrong? Thanks.
The solution says that equities bring down the overall yield of the fund. I presume this is from GRY of Bonds being higher than the dividend yield of equities because the dividend yield does not allow for the high expected, but uncertain, capital growth in equities.
I thought that the equity earnings yield; earnings per share/price, is generally higher than the GRY of bonds. So the above would not hold for earnings yield, like it does for dividend yield.
Have I picked something up wrong? Thanks.