H Model Equation (in terms of R)

Hey guys,

Kaplan Schweser reading was giving me a hard time with this.

When going from the traditional H Model equation to rewriting in terms of r (let’s say we don’t know the required rate of return), I don’t really see how they got to the new equation. This is page 117 of Schweser book 3.

I would think simply multiplying each side by (r-G long term) would allow an easy plug and go, but the math doesn’t seem to work out.


give the problem here… and I can try to solve it for you…

man my books are still en route… Going from the traditional model in the CFAI text you can simply multiply by (r-gL) and do some rearranging to solve for r. what is their final result?

P0 = D0/(r-gL) * [ N/2 (gs-gl) + (1+gl)

so r = gl + D0 * [N/2 (gs - gl) + (1+gl)] / P0

everything else on the RHS is known…

Ah, see it now. Thanks guys.