Math Solver: Stock & Bond Valuation

Stock Valuation

For stocks, we use the Gordon Growth Model (or Dividend Discount Model – DDM). The value of a stock is equal to the present value of all its future dividends, assuming a constant dividend growth rate.

V_0 = \frac{D_1}{r-g}

où :

$$V_0$: current value of the stock$
$$D_1$: expected dividend next year$
$$r$: required rate of return for the investor$
$$g$: constant annual dividend growth rate$

Ideal for:

Mature companies with stable dividends,
Estimating whether a stock is overvalued or undervalued compared to its market price,
Comparing different stocks based on their long-term return potential.

Bond Valuation

For bonds, the valuation is based on the discounting of future cash flows. The present value of a bond is the sum of all future coupon payments and the face value repaid at maturity, discounted at the market yield rate:

P_0 = \sum_{t=1}^{N} \frac{C}{(1+r)^t} + \frac{F}{(1+r)^N}

où :

$$P_0$: current price of the bond$
$$C$: periodic coupon payment amount$
$$F$: face value at maturity$
$$r$: market yield rate$
$$N$: number of periods until maturity$

Ideal for:

Assessing the fair value of a bond compared to its market price,
Deciding whether to buy or sell based on market conditions and expected return,
Comparing different bond instruments based on risk and return.

Tool Advantages

Time-saving: no more manual calculation of each cash flow or discount.
Accuracy: use standard financial models to get reliable values.
Education: ideal for understanding how markets value stocks and bonds.
Informed decisions: easily compare different investment opportunities and assess return potential.

This tool transforms complex financial calculations into clear and actionable results, allowing you to better understand the real value of your investments and make safer strategic decisions.