Ch 10: Risk and Return

Question 1

What are dollar returns?

Answer 1

• sum of the cash received and the change in value of the asset, in dollars
• dividend + change in market value

Question 2

What are percentage returns?

Answer 2

sum of cash received and t he change in value of the asset, divided by the initial investment
-dollar return / beginning market value

Question 3

What is the holding period return?

Answer 3

return that an investor would get when holding an investment over a period of T years

Question 4

What is the risk premium?

Answer 4

added return resulting from bearing risk

Question 5

What is the geometric average of returns?

Answer 5

• average compound return per period over multiple periods

- will be less than the arithmetic average unless all returns are equal