What am I missing - equity risk premium question, driving, equity

bkballa

this is driving me nuts
pg346 CFAI equity book (question is on pg 348, number 19)
Current level of S&P500 is 1200
Current div on the S&P500 is 30
Long term US gov bond yield is 4.75
Future earnings growth rate of the S&P500 is 6.75
The gordon growth model estimate of equity risk premium is closest to:
the answer is 4.67%
R=D1/E0 + G
I get the D1/E0 part, but not G
The have G as = .0675-.0475. Why? What am I missing?

bkballa

I’m such an idiot…I thought in my head the return of the S&P as a stock return for the asset - in this case the “asset” is the market…
stupid mistakes are going to be the death of me..