The following equation is called the Dividend Discount Model (DDM), Gordon Growth Model or the perpetuity with growth formula: ### P_0 = \frac{ C_1 }{ r - g } ###
What is ##g##? The value ##g## is the long term expected:
A stock's correlation with the market portfolio increases while its total risk is unchanged. What will happen to the stock's expected return and systematic risk?
A share was bought for $10 (at t=0) and paid its annual dividend of $0.50 one year later (at t=1). Just after the dividend was paid, the share price was $11 (at t=1).
What was the total return, capital return and income return? Calculate your answers as effective annual rates. The choices are given in the same order:
##r_\text{total}##, ##r_\text{capital}##, ##r_\text{dividend}##.
A project's net present value (NPV) is negative. Select the most correct statement.
A stock is expected to pay the following dividends:
| Cash Flows of a Stock | ||||||
| Time (yrs) | 0 | 1 | 2 | 3 | 4 | ... |
| Dividend ($) | 0 | 6 | 12 | 18 | 20 | ... |
After year 4, the dividend will grow in perpetuity at 5% pa. The required return of the stock is 10% pa. Both the growth rate and required return are given as effective annual rates.
If all of the dividends since time period zero were deposited into a bank account yielding 8% pa as an effective annual rate, how much money will be in the bank account in 2.5 years (in other words, at t=2.5)?
Question 452 limited liability, expected and historical returns
What is the lowest and highest expected share price and expected return from owning shares in a company over a finite period of time?
Let the current share price be ##p_0##, the expected future share price be ##p_1##, the expected future dividend be ##d_1## and the expected return be ##r##. Define the expected return as:
##r=\dfrac{p_1-p_0+d_1}{p_0} ##
The answer choices are stated using inequalities. As an example, the first answer choice "(a) ##0≤p<∞## and ##0≤r< 1##", states that the share price must be larger than or equal to zero and less than positive infinity, and that the return must be larger than or equal to zero and less than one.
A firm has a debt-to-equity ratio of 60%. What is its debt-to-assets ratio?
Which of the following equations is NOT equal to the total return of an asset?
Let ##p_0## be the current price, ##p_1## the expected price in one year and ##c_1## the expected income in one year.
"Buy low, sell high" is a phrase commonly heard in financial markets. It states that traders should try to buy assets at low prices and sell at high prices.
Traders in the fixed-coupon bond markets often quote promised bond yields rather than prices. Fixed-coupon bond traders should try to:
Which form of production is included in the Gross Domestic Product (GDP) reported by the government statistics agency?