CHAPTER 4
Risk and Return of a Single Asset
LEARNING OBJECTIVES
- Calculate the return on a single security.
- Determine holding period return, average return and expected return.
- Calculate standard deviation and variance of returns.
- Compute the probability of returns using the concept of normal distribution.
- Measure historical average return, standard deviation and risk premium using Indian capital market data.
INTRODUCTION
Risk and return are the most important concepts in finance. In fact, they are the foundation of modern finance theory. What is ‘risk’? How is it measured? What is ‘return’? How is it measured? Other related questions are: how are assets valued in capital markets? How do investors make their investment decisions? We ...
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