对外经济贸易大学投资学.ppt

* * * * * Lecture 3 Risk and Return Key Concepts and Skills Know how to calculate the return on an investment Understand the historical returns on various types of investments Understand the historical risks on various types of investments Risk, Return and Financial Markets We can examine returns in the financial markets to help us determine the appropriate returns on non-financial assets Lessons from capital market history There is a reward for bearing risk The greater the potential reward, the greater the risk This is called the risk-return trade-off Dollar Returns Total dollar return = income from investment + capital gain (loss) due to change in price Example: You bought a bond for $950 one year ago. You have received two coupons of $30 each. You can sell the bond for $975 today. What is your total dollar return? Income = 30 + 30 = 60 Capital gain = 975 – 950 = 25 Total dollar return = 60 + 25 = $85 Percentage Returns It is generally more intuitive to think in terms of percentages than in dollar returns Dividend yield = income / beginning price Capital gains yield = (ending price – beginning price) / beginning price Total percentage return = dividend yield + capital gains yield Example – Calculating Returns You bought a stock for $35 and you received dividends of $1.25. The stock is now selling for $40. What is your dollar return? Dollar return = 1.25 + (40 – 35) = $6.25 What is your percentage return? Dividend yield = 1.25 / 35 = 3.57% Capital gains yield = (40 – 35) / 35 = 14.29% Total percentage return = 3.57 + 14.29 = 17.86% Compound return Conventions for quoting rates of return : Usually we use APR, annual percentage rate APR=per-period rate*periods per year Sometimes we use EAR(effective annual rate) In continuous time, EAR=eAPR-1 St=S0ert, so rate of return equal Ln(St/S0) Rate of Return-example Suppose you buy T-bill maturing in one month for $9,900. HPR=(10000-9900)/9900=1.01% APR=1.01%*12=12.12% EAR=(1+1.01%)12-1=12.82% Figure 12.4 Y