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Unformatted text preview: payments equals the price The approximate formula for the yield to maturity: 2 price) current value (face maturity to years price) current -value (face payment coupon Annual YTM + + = Rate of return = price Initial loss or gain Capital Income + Dividend yield = price Stock payment Dividend Sustainable growth rate: g = ROE Plowback ratio Dividend Discount Model : H H H H 2 2 1 ) r 1 ( P ) r 1 ( DIV ... ) r 1 ( DIV r 1 DIV P + + + + + + + + = where H is the horizon date, and P H is the expected price of the stock at date H Constant-Growth Dividend Discount Model : ) g 1 ( DIV DIV where , g r DIV P 1 1 + =-= Expected Rate of Return Formula : 1 1 P P P P DIV r or , g P r-+ = + = 1 DIV 2...
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- Spring '09