5. Components of Return
Yield/Current Return
The most common form of return
for investors is the periodic cash
flows (income) on the investment,
either interest from bonds or
dividends from stocks.
Capital Gain/Capital Return
The appreciation (or depreciation)
in the price of the asset, commonly
called the capital gain (Loss).
6. What are the types of Return?
Realized Return
Expected/Historical Return
Nominal Return
Real Return
7. Realized Return
The actual return earned during the holding period for an
investment e.g. dividend, interest payments.
Applied on stocks
8. Expected Return/Historical Return
Amount of profit or loss an investment can anticipate.
Expected return cannot be Guaranteed.
The investor cannot be sure of the amount of return he/she is
going to receive.
9. Nominal Return
The money made without factoring expenses, e.g. taxes, inflation.
11. How to Calculate the return
R= Vf – Vi R = Ci + Pi – Pi-1
_______ ____________
Vi , Pi-1
Vf = Final Value Ci = Cash Flow
Vi = Initial Value Pi = Ending Value
Pi-1 = Beginning Value
History based/Traditional Method , Modern Method
12. Example
Suppose you have initial investment Rs. 100000 and final
value Rs. 200000. then find return?
= Rs.200000 – 100000 /
100000
= 100%
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