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RISK AND RETURN OF AN INDIVIDUAL SECURITIES

RISK AND RETURN OF AN INDIVIDUAL SECURITIES


In this analysis we do only one securities analysis

Return Formula:
=Cash Payment received (interest + dividend) + Difference between the price (capial gain)
------------------------------------------------------------------------------------------ x 100
                                      Purchasing price of the security

Example:
suppose Pepsi
Purchasing price = 25
Dividend / yield = 2
Selling price = 28

=    2 + 3
     --------  x  100
       25

= 20%  Return

return can be  (+ ve) (- ve) or zero

2nd METHOD:

If probability is given  in the question
E(R) = ∑ R x P

E(R)=Expected Return
R = total return
P = probability
∑ = Sum

Example:
pepsi security

Year:     1991 ,           1992 ,          1995,             2000
R:       20%=0.2    15%=0.15     -13%=-0.13    10%=0.1
P:       50%=0.5    10%=0.1         20%=0.2       20%=0.2
R x P: 0.1               0.05                -0.026          0.02         =  total 0.109
E(R)= 0.109 or 10.9%

propability = happen or non happen
Probability total answer  = 1

3rd Method:

If probability is not given

use mean formula=
_
X  = ∑X / n

_
x  = Expected Return
∑x = Total return
n = number of years


INVESTMENT AND PORTFOLIO MANAGEMENT
INVESTMENT VS SPECULATION AND GAMBLING
TYPES OF INVESTOR
INVESTMENT COMPANIES
TYPES OF MUTUAL FUNDS
TYPES OF BONDS FUNDS
MONEY MARKET FUNDS
SECURITIES MARKET
TYPES OF INDEX
TYPES OF BROKERS
BROKER'S ACCOUNT
MARGINAL ACCOUNT
ORDER AND ITS TYPES
RISK AND ITS TYPES
RETURN PORTFOLIO ANALYSIS
RISK PORTFOLIO ANALYSIS
RISK AND RETURN OF AN INDIVIDUAL SECURITIES
ANALYSIS OF COMMON STOCK VALUATION
CAPM MODEL (CAPITAL ASSET PRICING MODEL)
MARKOWITZ MODEL




MBA NOTES INVESTMENT AND PORTFOLIO MANAGEMENT

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