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Discount factor |
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Discount factorPresent value of $1 received at a stated future date.Discount factor Similar MatchesDividend discount modelDividend discount modelA way of valuing a share based on the net present value of the dividends that you expect to receive in the future.The simplest version of the model assumes that the company's dividend rate remains constant. The 'fair' price of the share is the dividend (in pennies per share) divided by the required rate of return. So if you want 10% a year from your shares, the value of a company paying a 7p dividend is 70p. If you think a return of 8% is satisfactory, the value of the same share is 87.5p.A more complex model assumes that the dividends of the company grow at a consistent rate. The fair price to pay is the next dividend divided by the required rate of return minus the rate at which dividends are expected to grow. So if the 7p dividend is expected to grow at 5% per year, an investor requiring an 12% return would value the shares at (7p x 1.05) divided by (0.12 - 0.05)= (7.35p) divided by (0.07)= 105p Discount securitiesDiscount securitiesNon-interest-bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, e.g., US Treasury bills. Dividend Discount ReturnDividend Discount ReturnThe rate of return which equates the present value of future expected dividends with the current market price of a security. Bank discount basisBank discount basisA convention used for quoting bids and offers for Treasury bills in terms of annualized yield, based on a 360-day year. Original issue discount debt (OID debt)Original issue discount debt (OID debt)Debt that is initially offered at a price below par. Further SuggestionsAccrued market discountDiscount payment Documented discount notes Accretion (of a discount) Discount Deep discount bond Discounted cash flow (DCF) Forward discount Discount Arbitrage Discount period Volume discount Discount period Discount window Forward discount Discounted basis Unamortized bond discount Discount yield Dividend Discount Model (DDM) Accrued discount Risk adjusted discount rate deep discount bond discount Discount rate discount Discount Interest |
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