- CFA Exams
- CFA Level I Exam
- Topic 4. Corporate Issuers
- Learning Module 18. Cost of Capital: Advanced Topics
- Subject 3. The Equity Risk Premium
CFA Practice Question
What is a potential limitation of the forward-looking approach in estimating ERP?
A. Relies on historical data
B. Reflects past market conditions
C. Subject to changes in market expectations
D. Ignores investor sentiment
Correct Answer: C
The forward-looking approach often rely on market sentiment and expectations
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