BADM
710
-
Chapter
10
Arithmetic
Average
-
ANS--
Return
earned
in
an
average
period
over
multiple
periods
-
This
option
is
overly
optimistic
for
long
horizons
-
Arithmetic
is
always
larger
than
Geometric
unless
R's
are
the
same
This
is
a
return
you
get
in
a
typical
year
-
What
did
you
get
in
a
typical
year?
Dollar
Returns
-
ANS--
The
sum
of
the
cash
received
and
the
change
in
the
value
of
the
asset
in
dollars
(Stock)Dollar
Return
=
Dividend
+
Change
in
Market
Value
(Bond)Dollar
Return
=
Coupon
+
Change
in
Market
Value
Geometric
Average
-
ANS--
Average
compound
return
per
period
over
multiple
periods
-
This
option
is
overly
pessimistic
for
short
horizons
-
How
well
have
you
done
per
year?
Holding
Period
Return
(HPR)
-
ANS--
The
holding
period
return
is
the
return
that
an
investor
would
get
when
holding
an
investment
over
a
period
of
T
years
Large
Company
Stocks
-
ANS--
Portfolio
of
the
S&P
500
Long-term
Corporate
Bonds
-
ANS--
High
quality
corporate
bonds
with
a
maturity
of
20
years
Long-term
Government
Bonds
-
ANS--
Government
bonds
with
a
maturity
of
20
years
Percentage
Returns
-
ANS--
The
sum
of
the
cash
received
and
the
change
in
the
value
of
the
asset,
divided
by
the
initial
investment
%
Return
=
Dividend
+
Change
in
Market
Value
/
Beggining
Market
Value
+
Dividend
Yield
+
Capital
Gains
Yield
Returns
-
ANS--
Really
measure
how
well
off
we
are
or
how
bad
we
are
after
investing
in
some
type
of
asset
Risk
Premium
-
ANS--
The
risk
premium
is
the
added
return
over
and
above
the
risk
free
rate
resulting
from
bearing
risk
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller AnswersCOM. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.99. You're not tied to anything after your purchase.
