Stocks Flashcards
1
Q
How do you trade stocks on an exchange
A
- Secondary market
2
Q
Market Capitalisation
A
share price * number of shares outstanding
3
Q
P/E Ratio
A
- Price / earnings ratio
4
Q
P/B Ratio
A
- Price : book ratio
5
Q
Holding Period Returns
A
- HPR = P1-Po/Po + D1/Po
6
Q
Stock valuation
A
- Comparables
- > comparing ratios between companies (Pe PB DP etc)
- > only as useful as values themselves, think level headed
- DCF or DDM
- > PVo= D1/(1+r) + D2/(1+r)^2 etc
7
Q
Constant dividends
A
- Perpetuity
- annuity
8
Q
Growing dividends
A
D2=(1+g)D1
D3=(1+g)D2 = (1+G)^2 D1
