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Compound Interest Part 1 6
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Lecture1.1
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Lecture1.2
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Lecture1.3
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Lecture1.4
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Lecture1.5
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Lecture1.6
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Compound Interest Part 2 3
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Lecture2.1
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Lecture2.2
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Lecture2.3
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Present Value 4
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Lecture3.1
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Lecture3.2
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Lecture3.3
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Lecture3.4
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Annuities 6
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Lecture4.1
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Lecture4.2
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Lecture4.3
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Lecture4.4
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Lecture4.5
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Lecture4.6
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Perpetuities 2
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Lecture5.1
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Lecture5.2
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Bonds 6
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Lecture6.1
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Lecture6.2
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Lecture6.3
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Lecture6.4
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Lecture6.5
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Lecture6.6
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Dividend Discount Model 3
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Lecture7.1
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Lecture7.2
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Lecture7.3
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Risk 8
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Lecture8.1
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Lecture8.2
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Lecture8.3
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Lecture8.4
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Lecture8.5
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Lecture8.6
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Lecture8.7
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Lecture8.8
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Capital Asset Pricing Model 6
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Lecture9.1
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Lecture9.2
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Lecture9.3
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Lecture9.4
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Lecture9.5
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Lecture9.6
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Introduction
Dividend Discount Model¶
The dividend discount model is a way to value a company based off its dividend payments. In the most basic case, we assume that a dividend is going to be paid every single year and it is going to be the same dividend every year. You may guess that we can model it as a perpetuity to get the value of all the payments discounted to the current time. In this case then, the value of a share of a stock would be equal to the dividend as a perpetuity like this:
$$ S = \frac{D_1}{r} $$
$ S = \text{Share Price} $
$ D_1 = \text{Dividend at year 1} $
$ r = \text{The discount rate} $
Prev
Finding r