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Given an S&P 500 forward earnings yield of 7.2% and 10-year Treasury notes yielding 2.68%, which of the following interpretations of this data using the Fed model is most accurate? A. The spread between the S&P 500 earnings yield and the Treasury notes is too great to make an informed decision. B. Since the S&P 500 is earning significantly more than the Treasuries this indicates the S&P 500 equity market is overvalued. C. The S&P 500 earnings yield is higher than the Treasury yield indicating that equities are undervalued and should increase in value. |