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'MBA/FIN 500 - Corporate Finnace'에 해당되는 글 2건

  1. 2014.04.16 Lec 4. CH 11. Return and Risk
  2. 2012.04.29 Lec 1. Discounted Cash Flow Valuation

1. Individual Securities

Expected return: The return that an individual expects a stock to earn over the next period. Only and expectation. An individual's expectation may simply be the average return per period a security has earned in the past.


Variance and standard deviation: The volatility of a security's return.


Covariance and correlation: Returns on individual securities are relate to one another. The relationship between two securities. 


*Note!!! Correlation is a translated version of covariance. The two parameters always have the same sign (positive, negative, or 0) 



2. Expected Return, Variance, and Covariance and Correlation

 

Stock Fund 

Bond Fund 

Scenario 

Rate of Return 

Squared Deviation 

Rate of Return 

Squared Deviation 

 Recession

 -7%

0.0324

 17%

0.0100 

Normal 

12% 

0.0001 

7% 

0.0000 

Boom 

28% 

0.0289 

-3% 

0.0100 

Expected return 

11.00% 

 

7.00% 

 

Variance 

0.0205 

 

0.0067 

 

Standard Deviation 

14.3% 

 

 

 







Scenario 

Stock Deviation 

Bond Deviation 

Product of Deviation 

 

 

 

 

 Recession

-.18 

.10

-.0180 

Normal 

0.1

0

.0000 

Boom 

.17

-.10

-.0170 

Sum 

 

 

 -.035

Covariance 

 

 

 -.0117


Correlation


     =>  Strong negative

'MBA > FIN 500 - Corporate Finnace' 카테고리의 다른 글

Lec 4. CH 11. Return and Risk  (0) 2014.04.16
Lec 1. Discounted Cash Flow Valuation  (0) 2012.04.29
Posted by shonini

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• Present Value: If the payments are in the future, they are discounted to reflect the time value of money.

• Future Value: The value of an asset at a specific date.


• The One-Period Case

If you were to invest $10,000 at 5 percent interest for one year, your investment would grow to $10,500.

 => interest = $500 ($10,000 * .05), principal = $10,000, total due = $10,500

 => FV(Future Value) = $10,500 = $10,000 * 1.05

 

 

If you were to be promised $10,000 due in one year when interest rates are 5-percent, your investment
would be worth $9,523.81 in today’s dollars.




• Multiperiod Case (Compounding)
Suppose a stock currently pays a dividend of $1.0, which is expected to grow at 14% per year for the next five years. What will the dividend be in five years?

Note, $5.92 > $1.10 + 5 X ($1.10 * 0.40) = $3.30  This is due to compounding.


• Present Value and Discounting
How much would an investor have to set aside today in order to have $20,000 five years from now if current rate is 15%?

       


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'MBA > FIN 500 - Corporate Finnace' 카테고리의 다른 글

Lec 4. CH 11. Return and Risk  (0) 2014.04.16
Lec 1. Discounted Cash Flow Valuation  (0) 2012.04.29
Posted by shonini

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