FIN 332 Lecture 5: Chapter 5 Class
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Cgy = 24 / 20 -1 = 20% Holding period return = 20% + 5% = 25% for 6 months! Geometric average/time weighted return- average of compounded returns. Arithmetic average- simple- doesn"t accurately measure wealth change of the investor. Holding period return = (p1 po + cash dist. ) Ex. beg price = 6mo later = dividend = 1. Apr = hpp x # of periods = 25% x 2 = 50% Ear = takes # of compounds into consideration. Calculator: iconb nom = apr; eff = ear; c/y = # of compounds. Aa = ra = (r1 + r2 + rn) / n. Only 2 6 month periods in a year. = apr / m (m = # of compounds; semiannual = 2; monthly =12) = (1 + apr / m) ^t -1 = (1 + . 50/2) ^2 -1 = 56. 25% Capital gains yield = p1 / po 1.