When using the dividend discount model to price a stock:
### p_{0} = \frac{d_1}{r - g} ###
The growth rate of dividends (g):
Question 235 SML, NPV, CAPM, risk
The security market line (SML) shows the relationship between beta and expected return.
Investment projects that plot on the SML would have:
Which one of the following is NOT usually considered an 'investable' asset for long-term wealth creation?
Question 444 investment decision, corporate financial decision theory
The investment decision primarily affects which part of a business?
The first payment of a constant perpetual annual cash flow is received at time 5. Let this cash flow be ##C_5## and the required return be ##r##.
So there will be equal annual cash flows at time 5, 6, 7 and so on forever, and all of the cash flows will be equal so ##C_5 = C_6 = C_7 = ...##
When the perpetuity formula is used to value this stream of cash flows, it will give a value (V) at time:
A firm has a debt-to-equity ratio of 60%. What is its debt-to-assets ratio?
What is the correlation of a variable X with itself?
The corr(X, X) or ##\rho_{X,X}## equals:
Which of the below formulas gives the payoff at maturity ##(f_T)## from being long a future? Let the underlying asset price at maturity be ##S_T## and the locked-in futures price be ##K_T##.
Question 729 book and market values, balance sheet, no explanation
If a firm makes a profit and pays no dividends, which of the firm’s accounts will increase?
Question 758 time calculation, fully amortising loan, no explanation
Two years ago you entered into a fully amortising home loan with a principal of $1,000,000, an interest rate of 6% pa compounding monthly with a term of 25 years.
Then interest rates suddenly fall to 4.5% pa (t=0), but you continue to pay the same monthly home loan payments as you did before. How long will it now take to pay off your home loan? Measure the time taken to pay off the home loan from the current time which is 2 years after the home loan was first entered into.
Assume that the lower interest rate was given to you immediately after the loan repayment at the end of year 2, which was the 24th payment since the loan was granted. Also assume that rates were and are expected to remain constant.