Chapter+10

# Chapter+10 - Chapter 10 Dollar Percent Returns Total dollar...

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Chapter 10 1-1 Dollar & Percent Returns • Total dollar return = the return on an investment measured in dollars • \$ Return = Dividends + Capital Gains • Capital Gains = Price received – Price paid • Total percent return = the return on an investment measured as a percentage of the original investment. • % Return = \$ Return/\$ Invested Percent Return t t t t t t t t t P P P D CGY DY P P P CGY P D 1 1 1 1 Return % Return % Dividend Yield Capital Gains Yield Example: Calculating Total Dollar and Total Percent Returns • You invest in a stock with a share price of \$25. • After one year, the stock price per share is \$35 • Each share paid a \$2 dividend • What was your total return? Dollars Percent Dividend \$2.00 \$2/25 = 8% Capital Gain \$35 - \$25 = \$10 \$10/25= 40 % Total Return \$2 + \$10 = \$12 \$12/\$25 = 48% Figure 10.4 U.S. Financial Markets The Historical Record: 1925- 2008 Risk–Return Tradeoff Two key lessons from capital market history: – There is a reward for bearing risk – The greater the potential reward, the greater the risk Year-to-Year Total Returns Large-Company Stock Returns

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Chapter+10 - Chapter 10 Dollar Percent Returns Total dollar...

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