AFM121 Lecture Notes - Lecture 10: Dividend Yield
15 Feb 2017
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Chapter 8 - common and preferred shares cont"d) Convertible preferreds: convertible into common shares at a premium to the converted value of the common shares. Dollar premium = - ( * 4) = . % premium = - ( * 4)/ = 16. 67% We care about dividend yield, not dividend dollar value. Payback: number of years to pay back the % conversion premium. Payback = (% premium) / (preferred yield - common yield) Preferred dividend yield = preferred dividend/preferred price. Payback = 16. 67% / ((. 40/) - (sh. 15/)) Value weighted = total equity value / market capitalizations. In a value weighted index, would apple and google be about weighted the same. Close, but apple would be slightly higher. Tends to get skewed for individual share prices which are really large. Must make full payment before settlement date. k - share sale - costs k. The investment dealer/brokerage firm lends clients money to buy securities.
