ACTSC371 Chapter Notes - Chapter 4: Value Investing, Comparator, Skewness
14 Apr 2016
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Nominal interest rate the growth rate of your money. Real interest rate the growth rate of your purchasing power. R=nominal rate, r=real rate, i=inlaion rate: r = r i (approx. , exact relaionship r = (r-i)/(1+i) The opposite happens when interest rates are low. Dollar returns = dividend + change in market value. Returns: example: suppose you bought 100 shares of company x at the beginning of the year at /share. Over the past year, you received dividends sh. 20/share. At the end of the year, the stock sells for /share. What is your return: iniial investment = * 100 = , at the end of the year, you have stock worth and cash dividends of / Return (in dollar) = = + ( - ) Holding period returns: the holding period return is the return that an investor would get over a period of n years, suppose the return during year i is given as r(i):
