Risk And Rates Of Return, Lecture Notes - Financial Management, Study notes for Financial Management. University of Michigan (MI)

Financial Management

Description: All Financial Assets Produce CFs, Risk of Asset Depends on Risk of CFs, Stand-alone Risk of Asset’s CFs, Portfolio Risk of CFs , Diversifiable and Market Risk, Risk
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CHAPTER 8: Risk and Rates of Return
Updated: September 20, 2011
All Financial Assets Produce CFs
Risk of Asset Depends on Risk of CFs
Stand-alone Risk of Asset’s CFs
Portfolio Risk of CFs
Diversifiable and Market Risk
Risk & return: CAPM / SML
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Investment returns
The rate of return on an investment can be
calculated as follows:
(Amount received Amount invested)
Return = ________________________
Amount invested
For example, if $1,000 is invested and $1,100 is
returned after one year, the rate of return for this
investment is:
($1,100 - $1,000) / $1,000 = 10%.
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