The bond-yield-plus-risk-premium formula is used to calculate what?

The bond-yield-plus-risk-premium formula is utilized specifically to determine the expected rate of return for stocks by adding a risk premium to the yield of a comparable bond. This method recognizes that stocks generally entail higher risk compared to bonds, hence an investor would require a higher expected return to compensate for that increased risk. The bond yield represents the return one would earn from a safer investment (the bond), and the risk premium serves as the additional return to entice investors to take on the higher level of uncertainty associated with stocks.

This approach operates on the principle that as investors look to allocate their capital, they will assess the potential returns relative to the risk taken. By combining a stable and predictable yield from bonds with an additional risk premium that reflects specific market conditions or the risks associated with the stock market, investors can calculate a more complete picture of what they might expect from an investment in stocks.

The other options address different concepts that don't align directly with the bond-yield-plus-risk-premium formula's intent or function.