ADMS 3530 Lecture Notes - Lecture 5: Sam Groth, Google, Efficient-Market Hypothesis

• School: York University
• Department: Administrative Studies
• Course: ADMS 3530
• Professor: King Lois

Document Summary

Price of stock (or bond) today = pv future cash flows. Pv = p0 = cf1 + cf2 + cfn (1 + r)1 (1 + r)2 (1 + r)n. Assume you hold a stock for only one year, then. Pv = p0 = div1 + p1 or (1 + r)1 (1 + r)1. Copper i(cid:374)(cid:272). (cid:859)s di(cid:448)ide(cid:374)d (cid:374)e(cid:454)t (cid:455)ear (cid:449)ill (cid:271)e per share. Equally risky stocks of other companies offer expected returns of 10%. Div1 = 5; p1 = 105; r = 10% Pv = p0 = div1 + p1 (1 + r)1. P0 = (5 + 105) = . Types of equity valuation models: required rate of return model: Expected return = r = div yield + price yield: r = div1 + (p1 p0) P0 p0 (background for the dividend discount model) Il(cid:448)er i(cid:374)(cid:272). (cid:859)s di(cid:448)ide(cid:374)d (cid:374)e(cid:454)t (cid:455)ear (cid:449)ill (cid:271)e . (cid:1004)(cid:1004) per share. and the stock is currently selling for .