FIN 3901 Lecture 10: Chapter 10
Document Summary
The greater the potential reward, the greater the risk. Total dollar return= the return on an investment measured in dollars. Capital gains= price received price paid. Total percent return= the return on an investment measured as a percentage of the original investment. Total % return= $ return or capital gain + dividend. Or total % return= capital gains yield + dividend yield. Rate of return on a riskless investment. Excess return on a risky asset over the risk free rate. Variance and sd measure volatility (flexibility) of returns. Variance = weighted average of squared deviations. Standard deviation= square root of variance: arithmetic average: Return earned in an average period over multiple periods: geometric average: Answers the question: (cid:498)what was your return in an average year over a particular period? (cid:499) Answers the question: (cid:498)what was your average compound return per year over a particular period? (cid:499) Average compound return per period over multiple periods.
