Show your calculations.

[sachin_patel]

2007 mock has given the components needed to calculate return using Grinold–Kroner model. Also said show your calculations. (total 3 points)
I wrote below. How much point would I get out of 3 based on below? Thanks!
Expected return = 2% + 1% + 4% + 4%+ 0.25% = 11.25%
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The guideline answer mentioned below.
The return to U.S. equities using the Grinold–Kroner model is calculated as follows:

E(R e ) = D/P – ∆S + i + g + ∆P/E

Where
E(R e ) is the expected return on equity
D/P is the expected dividend yield = 2%
∆S is the expected percent change in shares outstanding (the negative of the
repurchase yield) = –1%
i is the expected inflation rate = 4%
g is the expected real total earnings growth rate = 4%
∆P/E is the per-period percent change in the P/E multiple = 0.25%

Therefore E(R e ) = 2% – (–1%) +4% + 4% + 0.25% = 11.25%

 

[sachin_patel]

are you sure? do i have to put notations or at least equation term?

 

[Galli]

You’re over complicating this…

 

[sachin_patel]

Instead tell me how much would you grade me and i’ll call it an end of this thread.

 

[cpk123]

I am not sure whether you wrote the answer because you knew it (or bcos you copied it from the guy next to you). Not that you did it, but you really need to show the grader you know the subject well enough to be given a few grade points.
Please label your answer - with the equation quotations and substitutions and I might give you some points.
At the least put in
E(R e ) = D/P – ∆S + i + g + ∆P/E
and then
instead of 2% + 1% + 4% + 4%+ 0.25% = 11.25%
= 2% - (-1%) + 4% + 4%+ 0.25% = 11.25%
this shows me you know what you are writing…

 

[sachin_patel]

Ok got it..
Thank you!!