2.5 Stud%20Week%209%20Lecture%201%20Risk%20and%20Return.ppt

# 2.5 Stud%20Week%209%20Lecture%201%20Risk%20and%20Return.ppt...

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Risk and Return Basics Week 9 Lecture 1

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Topics Covered Rates of Return Measuring Risk Thinking About Risk and Return
Investment returns The rate of return on an investment can be calculated as  follows: (Amount received – Amount invested) Return =       ________________________                                                    Amount invested For example, if \$1,000 is invested and \$1,100 is returned after  one year, the rate of return for this investment is:

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Returns: Example Suppose you bought 100 shares of Wal-Mart (WMT) one  year ago today at \$25. Over the last year, you received \$20  in dividends (= 20 cents per share × 100 shares). At the end  of the year, the stock sells for \$30. What was your return? You did quite well. You invested ______________  ________.  At the end of the year, you have stock worth  _______ and cash dividends of ____.  Your dollar gain was  _____ = ____ + _____________. Your percentage gain for the year is =
Rates of Return:  Example 2 = Return Percentage Percentage Return = Capital Gain + Dividend Initial Share Price A share of stock sells for \$31.12.  The dividend  is \$.82 and the capital gain you receive is \$5.47.    What is the return you receive?

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Rates of Return Dividend Yield = Dividend Initial Share Price Capital Gain Yield = Capital Gain Initial Share Price Percentage Return = Capital Gain + Dividend Initial Share Price
Rates of Return % 2.6 or 026 . = Yield Dividend = % 17.6 or 176 . = Yield Gain Capital =

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Defining and Measuring Risk Risk is the _______ that an outcome ____  ___________ will occur The probability distribution is a listing of all  possible outcomes with a probability assigned to  each must sum __________
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## This note was uploaded on 12/23/2009 for the course BCOM FINC 201 taught by Professor Debrak.reed during the Spring '09 term at Canterbury.

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2.5 Stud%20Week%209%20Lecture%201%20Risk%20and%20Return.ppt...

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