week1_f101 - Week 1 Holding period total rate of return and...

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Unformatted text preview: Week 1 Holding period total rate of return and return statistics Holding period total rate of return Total income from investment over holding period, divided by original amount invested by investor Total income = capital gain + distributed income Holding period total return = % capital gain + % dividend yield Examples Simplest case: [(ending value-beginning value) + dividend]/beginning value More general calculation needs to take into account: all distributions; time value of money; change in the investment base General rule: calculate return acting as if all distributions are reinvested in more shares of the same investment (time-weighted rate of return) Calculating time-weighted holding period total rate of return Using the index method Using linked-return method All these methods should give the same answer if done correctly Example C:\Users\l-chan2\Documents\Class\example1 C:\Users\l-chan2\Documents\Class\example1 Time-weighted holding period total rate of return Another complication: cash inflows into and outflows from portfolio Example Dollar-weighted holding period...
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This note was uploaded on 01/18/2011 for the course FIN 580 taught by Professor Staff during the Fall '08 term at University of Illinois, Urbana Champaign.

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week1_f101 - Week 1 Holding period total rate of return and...

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