Financial Management: Core Concepts, Third Edition

Chapter 8 Risk and Return

AT a Glance

1. LO1 Calculate profits and returns on an investment and convert holding period returns to annual returns.

   Profits are the dollars gained on an investment, measured as the difference between the original cost of the investment and its ending value plus any distributions received while holding the asset. A return is the measure of the percentage of change or the ratio of the gain (or loss) to the cost of the investment.

   Returns are typically stated on an annual basis. To compare different investments held over different periods of time, it is necessary to convert the return that represents the entire holding ...