2

Question 1

Return on a share (R):

Capital gains over the holding period:

Answer 1

The difference between the price at the end of the period (Pt) and the price at the beginning of the period (Pt-1).
Dividend payments over the holding period (Dt).

The formula for return (R) is:
R = (gains in Wealth) / (Initial Wealth)

Question 2

Wealth Relative (WR):

Answer 2

It’s a measure of how your wealth changes over time in relation to your initial wealth.
It’s calculated as:

WR(t) = 1 + R(t) > 0

Where WR(t) represents the wealth relative at time ‘t’ and R(t) represents the return on the share at time ‘t’.

Question 3

Return on a share 𝑅 𝑡 formula

Answer 3

(𝑃𝑡−𝑃𝑡−1+𝐷𝑡)/ (pt-1)

Pt: Price of the share at the end of the period.
Pt-1: Price of the share at the beginning of the period.
Dt: Dividend payments received over the holding period.

Question 4

Mean formula

Answer 4

𝑅= E(R) = ΣPi Ri

Question 5

Variance formula and standard deviation

Answer 5

Σ Pi(Ri-Pi)^2

Square root of this is standard deviation