Summary: Reading 5

Thought I’d start tossing out threads dedicated to Readings with observations, key items, and hints to watch out for… figure toss everyone’s ideas in here and we’ll be good. ------------------------- Think of interest as required rate of return, op cost, or discount rate. interest rate includes risk free rate, inflation premium, maturity premium, liquidity premium, and default risk premium. The more periods of compounding, the greater the EAR. Continous compounding has the greater EAR. Remember to set your calculator the BGN for annuity due! Present value of a perpetuity is A/r… and this is the framework for the dividend discount model.