标题: Q on equity forward contracts [打印本页]

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作者: Sunshine4ever    时间: 2011-7-11 19:06     标题: Q on equity forward contracts

CFAI text Reading 60 page 28:

"the stock price discounted at the dividend yield rate is equivalent to the stock price minus the present value of the dividends."

Could someone kindly prove how this is true? Answer in mathematical or verbal explanation would both be appreciated.

Thank you

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作者: jarobi04    时间: 2011-7-11 19:06

Stock price at time (t) = [Stock price at time (t+1) + dividend] / (1+r)

rearranging

S(t+1) / (1+r) = S(t) - [dividend / (1+r)]

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作者: lucasg85    时间: 2011-7-11 19:06

But in the above equation, the stock price is not discounted by the dividend yield rate, it's still discounted by the interest rate, r...

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作者: wxs1986    时间: 2011-7-11 19:06

you could use the dividend yield rate, that would be the appropriate discount rate for the risk profile

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作者: RepoToronto    时间: 2011-7-11 19:06

My mind is completely blank from level 1... Given the interest rate and the dividend amount, how do we calculate the dividend yield rate? Extremely sorry about the dumb question...

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作者: President1988    时间: 2011-7-11 19:06

I havent gone over this section of the book yet, so Im a bit unsure of the specific answer your looking for. However, the dividend yield rate or simply "dividend yield", is the amount of the dividend over the stock price. Im assuming they would give you both amounts for the question. Hope this helps a bit.

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