In this item set, according to the formula given by sir for Question 3, the answer is 9.5, but the answer in the book is 7 considering that in the long the P/E does not matter but the 2.5 % is the dividend which needs to be accounted for. Please confirm the answer, attaching the snapshot of the answer.
Yes, you are correct. The answer provided is of the Nominal GDP. To get to the Equity returns, dividend yield needs to be added.
yes thank you !