Expected stock price formula
[DOC File]Chapter 1 -- An Introduction To Financial Management
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price for a constant growth stock. Expected return = expected dividend yield + expected capital gains yield . In the above example, where 5.25% is the expected dividend yield and 5% is the expected capital gains yield (stock price will increase by 5% per year)
[DOCX File]CHAPTER 23
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The stock price has a constant expected return μ and the volatility of its return is constant σ times the Wiener process dZ(t,w) which follows normal distribution with zero mean and variance, t. Therefore, by equation (27.12) in section 27.3, the stock price follows a lognormal distribution with mean (μ-1 2 . σ2)t and variance σ2t.
[DOC File]CHAPTER 1
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When a strike price and stock price are equal, the option is: in the money. at the money. out of the money. at its option premium (easy, L.O. 2, Section 1, b) The Black-Scholes option-pricing formula demonstrates how option values vary with stock price. If an option is very far out of the money the: a. option value and stock price are equal
[DOC File]University of Kansas
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A stock price has an expected return of 16% and a volatility of 35%. The current price is $38. What is the probability that a European call option on the stock with an exercise price of $40 and a maturity date in six months will be exercised?
[DOC File]Dividend discount model (a
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Expected rate of return. This formula is really a manipulation of the dividend discount model. In this formula we know the stock price and we are solving for the rate of return. As before, D1 is the dividend that is expected next period. Also, “g” is the constant rate of growth. Notice that this formula uses “P” to represent stock price.
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