Chap 10:

Total Return (Monetary)= Capital Gain + Income/Dividend

Capital Gain+ Income

Total Return (Percentage)=
Buying Price

Capital Gain Dividend

Total Return= +
Buying Price Buying Price

Capital Gain yield Dividend yield

Holding Period Return (Monetary)= (1+R1) × (1+R2) × (1+R3) …. (1+Rn)

Holding Period Return (Percentage)= (1+R1) × (1+R2) × (1+R3) …. (1+Rn) – 1

Arithmetic Return= (∑Return) ÷ Number of Year

Geometric Return= (1+R1) × (1+R2) × (1+R3) …. (1+Rn)1/T —1

Chap 11:

Expected Return= ∑ (Probability × Return)

Variance= ∑ ( Return−Expected Return )2 × Probability

Standard Deviation= ∑ ( Return−Expected Return )2 × Probability

√
 Covariance (A, B) = [R-E(RA) × R-E(RB)×Probability]

Covariance( A , B)
Correlation=
σA × σB

Portfolio Expected Return= ∑ (Weight × Return)

Portfolio Standard Deviation=

√(WA ¿¿ 2)(σA2 )+(WB ¿¿ 2)( σB¿¿ 2)+2 ×WA ×σA × WB ×σB × ρAB ¿ ¿ ¿
[W=Weight, σ = Standard Deviation, ρ =Correlaion]

Measurement of Systematic Risk

Covariance( S , M )
Beta β =
σM 2
S= Stock, M=Market

Variance= ∑ ( Return−Expected Return )2 × Probability

Portfolio Beta= ∑ (Weight × β)

Market Beta (β) is always 1

β> 1; More risk more return
β< 1; Less risk less return
β= 1; Same return and risk as market
β= +; Same direction as market
β= -; Opposite direction to market
Capital Asset Pricing Model
E(R)= Rf + β (RM- Rf) [CAPM/Expected return] E(R)= Rf+ β×MPR [Market Risk Premium]