MBA 702 Final Exam - Han Shi
Dollar Returns - answer The sum of the cash received and the change in value of the
asset, in dollars.
= Dividends + Change in Market Value
= Income component + Capital gain (loss)
Percentage Returns - answer The sum of the cash received and the change in value of
the asset divided by the initial investment
= Dollar return/ Beginning market value
= (Dividends + Change in market value) / Initial investment
= Dividend yield + Capital gains yield
Dividend Yield - answerCash received; Income component
= Dividend (yr 2)/ price (yr 1)
Capital Gains Yield - answer(New price - Old price)/ Old price
Holding Period Return - answerReturn an investor would get when holding an
investment over t years, when the return during year i is given as Ri
Total return an investor would earn from holding an investment over n periods
= (1+R1)*(1+R2)*...*(1+Rt)-1
Historical Returns - answerAverage stock returns and risk free premium returns
T-bill rate = risk free return
Risk Premium - answerReward for bearing risk
The difference between a risky investment return and the risk-free rate
Variance - answerAverage squared deviation
Standard Deviation - answerSquare root of variance
Statistical measure of the spread
Spread: measure of how much a return can deviate from average
Very spread = Uncertain
Dollar Returns - answer The sum of the cash received and the change in value of the
asset, in dollars.
= Dividends + Change in Market Value
= Income component + Capital gain (loss)
Percentage Returns - answer The sum of the cash received and the change in value of
the asset divided by the initial investment
= Dollar return/ Beginning market value
= (Dividends + Change in market value) / Initial investment
= Dividend yield + Capital gains yield
Dividend Yield - answerCash received; Income component
= Dividend (yr 2)/ price (yr 1)
Capital Gains Yield - answer(New price - Old price)/ Old price
Holding Period Return - answerReturn an investor would get when holding an
investment over t years, when the return during year i is given as Ri
Total return an investor would earn from holding an investment over n periods
= (1+R1)*(1+R2)*...*(1+Rt)-1
Historical Returns - answerAverage stock returns and risk free premium returns
T-bill rate = risk free return
Risk Premium - answerReward for bearing risk
The difference between a risky investment return and the risk-free rate
Variance - answerAverage squared deviation
Standard Deviation - answerSquare root of variance
Statistical measure of the spread
Spread: measure of how much a return can deviate from average
Very spread = Uncertain
