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

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Week 1 Holding period total rate of return and return statistics
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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
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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)
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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
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Example C:\Users\l-chan2\Documents\Class\example1 C:\Users\l-chan2\Documents\Class\example1
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Time-weighted holding period total rate of return Another complication: cash inflows into and outflows from portfolio Example
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