MAF101 Lecture Notes - Lecture 5: Weighted Arithmetic Mean, Capital Structure, Risk Aversion
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A gain or a loss from an investment. There are 2 measures of a return: realised or holding return period = actual total return earned during the period the asset was held, expected return = reflects likelihood of possible returns. Average of possible returns, where each return is weighted by the probability of it occurring. Income = cash received over the holding period e. g. ralph received . 50 per share dividend. Capital gain = change in value of the investment over the holding period. It is the difference between selling (end) and purchase (start) prices. Realised returns: yield from his cba investment e. g. ralph purchased cba shares for . 00 and sold them for . 00. Capital gain = 76 65 = . 00. To find who has the better investment performance we need to look at who has the best return relative to their capital (initial) inlay.