FIN 502 Chapter Notes - Chapter 14: Efficient-Market Hypothesis, Asset Allocation, Reinvestment Risk

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2 Jul 2013
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Major developments in the investment world: enormous expansion in scholarly knowledge about investments, enormous explosion of investment products available even for the small investor. Investing- using the savings that you have and making it work : putting it in investments to earn a rate of return. Important characteristics: return, risk, liquidity, marketability, term, management, tax considerations, divisibility. Return on investment: ways to earn a return off investment. Income return- periodic cash flow that the investor receives. Capital gain return- investment is generated when you sell it for a price higher than what you paid for: total return- income return plus the capital gain return. Realized rate of return- rate of return that has actually occurred in a past period. Expected rate of return- return that is expected to happen in the future. What we are expecting to earn for buying and holding an investment.

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