(10 Marks) You are trying to forecast the expected level of aggregate Toronto stock market for the next year.

(10 Marks) You are trying to forecast the expected level of aggregate Toronto stock market for the next year.

2. (10 Marks) You are trying to forecast the expected level of aggregate Toronto stock market for the next year. Suppose the current T—Bill rate is 4%, and the yield to maturity for the 10-year Canada bonds is 5% per year, the expected rate of inflation is 2% per year, and the expected EPS for the S&P/TSX composite is $450. What is your forecast level, assuming 3.5% risk premium (difference between corporate earnings yield and 10-year government bond)?(5 Marks) What is your forecast, assuming no risk premium?(5 Marks)
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