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  • Formulas For Stocks and Bonds

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    Rahat Islam
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    This document provides formulas for calculating yields and prices for stocks and bonds. It defines dividend yield as the expected dividend divided by the purchase price of a stock. Capital gains yield is defined as the change in selling price minus the purchase price divided by the purchase price. Total return is the sum of dividend yield and capital gains yield. Formulas are also provided for calculating the market price of preferred stock based on expected dividend and yield, as well as the market price of common stock based on expected dividend, yield and growth rate. Finally, a formula is given for calculating the market price of a bond based on its interest payments, maturity date and yield.

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    Formulas for Stocks and Bonds

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    This document provides formulas for calculating yields and prices for stocks and bonds. It defines dividend yield as the expected dividend divided by the purchase price of a stock. Capital gains yield is defined as the change in selling price minus the purchase price divided by the purchase price. Total return is the sum of dividend yield and capital gains yield. Formulas are also provided for calculating the market price of preferred stock based on expected dividend and yield, as well as the market price of common stock based on expected dividend, yield and growth rate. Finally, a formula is given for calculating the market price of a bond based on its interest payments, maturity date and yield.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    888 views1 page

    Formulas For Stocks and Bonds

    Uploaded by

    Rahat Islam
    This document provides formulas for calculating yields and prices for stocks and bonds. It defines dividend yield as the expected dividend divided by the purchase price of a stock. Capital gains yield is defined as the change in selling price minus the purchase price divided by the purchase price. Total return is the sum of dividend yield and capital gains yield. Formulas are also provided for calculating the market price of preferred stock based on expected dividend and yield, as well as the market price of common stock based on expected dividend, yield and growth rate. Finally, a formula is given for calculating the market price of a bond based on its interest payments, maturity date and yield.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Formulas for Stocks and Bonds:

    Expected Dividend (D1)


    Dividend Yield =
    Purchase Price of Stock (Po )
    Selling Price of Stock P1 − Purchase Price of Stock (Po )
    Capital Gains Yield =
    Purchase Price of Stock (Po )

    Total Gain/Return/Yield, r = Dividend Yield + Capital Gains Yield


    D1 P1 − Po
    = +
    Po Po
    D1
    Market Price/Value of Preferred Stock, Po =
    r
    D1
    Market Price/Value of Common Stock, Po =
    r −g

    Expected Dividend, D1 = Do (1+g) [Do = Past Dividend]


    1
    1− M
    (1+r )n
    Market Price/Value of Bond, VB = INT [ ]+
    r (1+r)n

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