Forecasted Dividend + Forecasted end of the period stock price

 Expected return, R = -1
Initial investment

 Expected return (for probability distribution), =

 Measurement of risk =

Investment∗Variance
 Gross return from investment =
100

Investment∗Standard deviation
 Risk from investment =
100

 Future value (compounding technique), F = P(1+r) n

D1
 One year holding period, S0 = 1 +
(1+k )
S1
(1+k )1

S0= current market price of the share.

 Multiple year holding period, S0 = D1 +

1
(1+k )
D2 D3 Dn +S n
2 + 3 + ……… +
(1+k ) (1+k ) (1+k )n

1
 D1 = D 0 (1+ g)
 D 0 (1+g)1 D 0 (1+g)2 D 0 (1+g) n
 Constant growth model, S0 = 1 + 2 + …… + n
(1+ k) (1+ k)
(1+ k)
D1 D0 (1+g)
 When ‘n’ approaches infinity this formula can be simplified as; S 0 = OR,
k−g k−g
 Multiple growth model, S0 = V1 + V2
D1 D2 Dn
 V1 = 1 + 2 + ……… + n
(1+k ) (1+k ) (1+k )

DN (1+ g)
 V2 = N
(k −g)(1+k )


 F
 Spot interest rate, Present value (discounting technique), P = n
(1+k )

 Intrinsic value of the share,

 Market price of the share,

 Bond duration =

 Bon duration =

 YTM = Yield to maturity

 MP = Market price
 Ct = Coupon
 TV = Terminal value