Ch07 - Chapter 7 Historical Asset Returns Road Map Part A Introduction to Finance Part B Valuation of assets given discount rates Part C

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Unformatted text preview: Chapter 7 Historical Asset Returns Road Map Part A Introduction to Finance. Part B Valuation of assets, given discount rates. Part C Determination of discount rates. • Historical asset returns. • Time value of money. • Risk. • Portfolio theory. • Capital Asset Pricing Model (CAPM). • Arbitrage Pricing Theory (APT). Part D Introduction to corporate. Main Issues • Asset Returns • Historic Asset Returns in U.S. 7-2 Historical Asset Returns Chapter 7 1 Asset Returns Asset returns over a given period are often uncertain: r t = D t + P t − P t − 1 P t − 1 = D t + P t P t − 1 − 1 where • P t − 1 is the price at the beginning of period • P t is the price at the end of period • D t is the dividend at the end of period. Return on an asset is often uncertain ex ante (a random variable). It can be characterized by • all possible outcomes, and • probability of each outcome (state)....
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This note was uploaded on 01/19/2011 for the course 15 15.407 taught by Professor Wang during the Fall '03 term at MIT.

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Ch07 - Chapter 7 Historical Asset Returns Road Map Part A Introduction to Finance Part B Valuation of assets given discount rates Part C

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