# Chapter 9 - Chapter 9 Risk and Return: A First Look Returns...

This preview shows pages 1–4. Sign up to view the full content.

Chapter 9 Risk and Return: A First Look

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Returns Dollar Return on an investment = Cash you get (or could get) out of investment – Original investment Percentage Return = Dollar Return/Original Investment Typically the cash you get out of investment is a dividend plus a capital gain Example Buy 100 shares of Wal-Mart (WMT) at \$25. Receive over the year \$20 in dividends Stock price at end of year is \$30 Dollar return = [(30 x 100) + 20] – [25 x 100 ] = \$520 Percentage return = 520/(25x100) = .208
Holding Period Returns Holding Period Return (HPR) is return investors would experience after investing \$1 for a period of n years, when the return during year i is given as ri Example 1 )] 1 ( ) 2 1 ( ) 1 1 [( Return Period Holding - + × × + × + = n r r r Year Return 1 10% 2 -5% 3 20% 4 15% % 21 . 44 4421 . 1 ) 15 . 1 ( ) 20 . 1 ( ) 95 (. ) 10 . 1 ( 1 ) 4 1 ( ) 3 1 ( ) 2 1 ( ) 1 1 ( Return Period Holding = = - × × × = - + × + × + × + = = r r r r

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 10/17/2011 for the course ECON 101 taught by Professor Thompson during the Spring '11 term at Michigan State University.

### Page1 / 11

Chapter 9 - Chapter 9 Risk and Return: A First Look Returns...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online