COMM 2202 Lecture Notes - Lecture 12: Risk-Free Interest Rate, Dividend Yield, United States Treasury Security
13 Dec 2018
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Dollar returns: total dollar return = income from investment + capital gain (loss) due to change in price, example, you bought a bond for 1 year ago. You have received two coupons of each. You can sell the bond for today. Example calculating returns: you bought a stock for and you received dividends of . 25. Risk greatest to least: s&p/tsx composite stocks, bonds, t-bills, cpi. Risk premiums: the extra return (compensation) earned for taking on risk, treasury bills are considered to be risk-free, the risk premium is the return over and above the risk-free rate (the treasury bill risk premium) Table 12. 3 average returns and risk premiums 1957 2014. Th best investment depends on both risk and return the small stock (which has the highest risk premium) might not be the best investment because it has more risk. It could also not be compensating a high enough risk premium.
