F
Frances
Member
For the part of the question describe how investment trust might value its unquoted investments using cashflow techniques -
I don't understand the part of the solution where it talks about the discount rate. It seems to say that the dividends could be discounted at an appropriate rate based on long term conventional gov bonds + adjust for default risk + adjust for marketability/liquidity. (This part I am okay with).
It then goes on to say: the yield on an index linked government bond could be used in the discount rate, along with the real (rather than nominal) rate of dividend growth. - Is this instead of the approach outlined above? Also, why would you take the real rather than nominal rate of dividend growth/why would you take the dividend growth full stop?
Thanks,
Fran
I don't understand the part of the solution where it talks about the discount rate. It seems to say that the dividends could be discounted at an appropriate rate based on long term conventional gov bonds + adjust for default risk + adjust for marketability/liquidity. (This part I am okay with).
It then goes on to say: the yield on an index linked government bond could be used in the discount rate, along with the real (rather than nominal) rate of dividend growth. - Is this instead of the approach outlined above? Also, why would you take the real rather than nominal rate of dividend growth/why would you take the dividend growth full stop?
Thanks,
Fran