Finance Formulas / July 18, 2018 / Natalia Atkins
When investors buy bonds, they essentially lend bond issuers money. In return, bond issuers agree to pay investors interest on bonds throughout their lifetime and to repay the face value of bonds upon maturity. The money that investors earn is called yield. Investors do not have to hold bonds to maturity. Instead, they may sell them for a higher or lower price to other investors, and if an investor makes money on the sale of a bond, that is also part of its yield.
For example, suppose Net Operating Income (NOI) is $120,000 per year and total debt service is $100,000 per year. In this case the debt service coverage ratio (DSCR) would simply be $120,000 $100,000, which equals 1.20. It’s also common to see an "x" after the ratio. In this example it could be shown as "1.20x", which indicates that NOI covers debt service 1.2 times.
The dividend growth rate is the annualized percentage rate of growth that a particular stock's dividend undergoes over a period of time. The time period included in the analysis can be of any interval desired, and is calculated by using the least squares method or by simply taking a simple annualized figure over the time period.
An immediate payment annuity is an annuity contract that is purchased with a single payment and pays a guaranteed income that starts almost immediately. Also called a "single-premium immediate annuity (SPIA)," "income annuity" or simply an "immediate annuity," an immediate payment annuity generally starts payment one month after a premium is paid and continues for as long as the annuitant (buyer) is alive or for a specific period of time.
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