Y SHRT JAGANDATH 16/0b 2012

mgdule-3
Risk and REurt Foundehonm ofmolerth
Hnane
what is rtiak ? Heo iA it meaurte Authorize tapital:>The maX
La
2ohat i rtehurtn ? Hod ia it meanurted amgunt ot ahoreCapital
combony 1

Hod arte awmets valuurd in capital martketn? allat Uhoiue

3)
Inventment duonm.0
lo it
L
4) Hoo do investortty make heart Aharteholder-
as erhe conshhda
doLLokedAr

Retutn on a aThdia cements is a lartge Compan

Single ame:

bough |0o Ahatey ot

wh houands 0f Shartt
holderth. Subpone you
mardket ptie of
of he yeart, ata
eCopan, at the b jinning
share i^ Elo Jhatr in totalmwsna)
eaeh
E S The par Valuue of

n tanh9
FTOte F S X l00 E2, So0
Arwhvestmen

yeart, Tndia Cements faid a

le dweng hat
1) Rupee rtehurt>
Dvidend a 25.
value of the sharte. .So, yourt
Divide tate appuy to he par
lol-x 351. ESo/-
13)ividend p Aharte :

xNo. of thart
rtaBeX part value)
dvidend (Dwiderd
1 Total sharne
13)T
Dividend Pert
ahartL X No.Of
Suppo, he prtie off he at the. tnd of Hgean 4
sharte.

Out to be 26F-So/.Hente, the tnding Ahautt þrtie Inreat

we have made a Capital gain. So,

Skard
pidel gain /Lom (selirng rite, Buyig retite)xo:CE
-

267. To- 225/) xlco

Ra ,250/

Total rtkut Dividen t Capitalgai)

50ty2so Ro4Sco
cask
at he tn o eeart ort,
you ADl tour hartey
be the dividend nCome puuhe prte Ceeds frto
DLoO dould
he ale of Ahartes
the end of he a r Dividedstyalsue of nol
4 cuh loto at Aharte

250+ (267:So Xtoo

Thihal invesmen t 4otal
rtewtn
27,00o
22Soo4So0 2000-
peretntag Heturtnm Tolal rlututs) , sool-, Invesmenf
22Soo
Reurtn inpertentage 0-20/. ort 20 /,
23,oo-
Pertoeniage rtetutns artefrtg uunlly ealudaeon perthrte
 Tota

Compenend o rehurt

Dividene imcome Copitedgain

ttrurt) On a Aharte
Rare of

iwidend yidd Capital gaingial

held fort 1yeart is a follotos,
So,4he rtaBeof rtekurtn ot a shart

1.8 Rate of rteruth - Dividtd yieldcapital

gai) zit
Ra DTVL P-Po capial gangiel
Po fo
oberte R : Rate o f rthurt
pividend yitd4
DIV +(R-Fo) DIM Dividend þert
Sharte rtteeuved t
Po
at He Prtiu pert sharte
o prtite put sharte P
af he erd of ytar
beginning of H ytart
of diidend intomE.,ar it
Dividane iel This purtuntage
the
sharte. ak
iven by dividing the dividend pert
the end of4he yearb
h sharte prtie. in the
begioming of he yeare (Po) D
tal gain ield.7 gin Aertene b4 he shartertita,akJhe end
andhesharta.prite in dhe beqminq divided
by Aharttpri inhe beginmng (P-te
L He tnding prtiue L begiming brtite, dhre 00uld b hejat
ain ot Capilal lon-
he above
So, in exampl,

rare of rteurth DIV

Po Po
2SC207 So-225
22S
0ol1t08 0.20 ort 20 . .
'Totaltutwn of 20o1. on yourt invetmen-1 rads p of 11:o
dividard iel on 18.91 of eepital gai
Nou queshon i what tould be yeut reekutn if tha, marcke price
of Tndia (ement A Aharte wertA, Q00nA aptert a yeort 2

Exheche rtshe of rtuhurtn DT4-Pa)

Po Po
+( 200-225)
225
0.0l1-0 I01=-0-lo Ort -lo/.
, You woul artn a negahve rtate of rtekurtn (-lo /.) because
of HeCabilal los ie. hegahve Cspital gain).
So h rttlutn of a share signifHceantly depends on the. change in
its Aharte prtie. The martket "ptite, of a Aharte, Ahod oioe
uthuatory Hen e, INeatment in Aharte^ A rtink
Sohe riK of a neurti depend on he volahiuy ofit
tuturtm
 OnrtealaZe. Capita gain ot LoAm T ! a n westert holds as Ahartt

and doeso' t Aelit at Hhe tnd of a bertind the dtfertente bchoren

he unrttalita4
begmng and ending sharte. þrtice ia the eapital
ainort laan).
The ivstort mut Conaidrt Hn tunttealized Capital zunCloM)ay
a artt of hert total rtetutn
3 Atmual Hate of rtetutn Rare ort
rteurth of a Company fatmorte
han ear
HOlA Annual rtaty of rtetrth, 20ol 200

Dvien DividEn chasttsaktalRetut

Yeor 4iedd prtte ea-R (31)
Pert ahate
2000 3.So 206 3S

SO0 2.12 223. 6S 8.32lo-

200

2002 46 81:7S -18-73 16-23

2 003 S.SO 3.03 20.40 1368 IS-6s

2001 SC0 43 So -29.9o2 15

260
S S 00 197.25 37-16 991
tekurn.
c
alulste ha ighut &laceyt
/
 Avertage rtae of rtehurn ARR IA the Aum o4the vart1ow) On

trtioe rtale of rttrtn bvidud by he. ro. o perdod

ARR
OtR RrtR,t - Ro
obaertn ot lealz
R hert RARR R
im
talta of tekurt
erciods 3,3
n Tota no o pertiocda
5Rateof tehutn an betding ertiod
Thvenorty may hol heir mventmentA in ahartes lort Lomgert Period
than Aert 4eart Heu ds oe
calolate holding bertiods returtm ?
EXomple: subpoxe you inves TL todain a Combanq akartg.fih
SHeart he rtaBe pt rteturtn ane 18.,. 0-lo /. andI4,
beehivelhat is the torth o gourt. Ahartes)

Aty-You hol 4he Ahare, Hprt ive yeartA hente you can caleudate
the orth o yourt mvesmen amumng tha eath eart dividends
Prom ehe prtewious eart arle rtivete in Aharte.
o.he oothh o Phe investmen aflet s yearty

C40-1)X(14o01)x(400)x (-01o) M[4o-

Yourt 1 Rubee Invetmen h grtain do P).32,atheendol s
 al eftutn |.3a

en, ttka rteturtn 0.32, ort 32/.

h va e -ve-eart hotdung-pertuod ttehrth
urD H yeart h

annual Cempo und rtate of rtetut),

-4
18 x 1-0x 100 X0-0 x 1-1
0 0-DSt ort .7/.
DST-1
mean rtturt
tebutn in the geomchruc
7TwA Compoun tae o
tate uootulo
today ot s+1. Compound
One rtanpee invested
aftert fve peartj:
grtad 4o apprtoKimatel RAI32
-oS+1 RA-32 .
Rikot rtaken of rehutv: yarjan and standartd dayiahion
Autuate overt He peruod ad i s
The annual rtaeof tcturt
in rtekrtM wete Caued by thevolari o t he ghane-
Sueuaion)
pe ten b) changes in dividernds, c) Riko, cerustn.
can we meanute the yastiabuty of rtate of
Qu hona Ho
rerun O{ shate( ortan amer)?
a

Okoikon of vasttabuly of rtaBe of rtekurty of a akare (awet)

tates cehurty iA deined asthe extent
of
n
heariabiuk ot
deviahonn (ort dispersjon) of mdiyidual rratey of rtekurtr
the
t h Qwertage
tate of rtetut).
rom
1
 herte arte tdo meajurte) o in dispertkioh. Sueh a

a VaruanLe
b Standart doviahon
landart deviahon ia the ca uarte rtoo ot artiane
Hod Ho Caluate vartianse and ctandart deiahbry

The ollouoing Stepa arte involved in Coluahing yartiance. ort Shandarto

devioton of rtares of rtekurty wnq kieorthta rteturt
Colulate avetage. rtate of rututh by uinq he totloding eqsafjo

3)Colaulate the dviahon.of indvidua rtatey of returt) htom

4heauertage tLat of rtukurtn and Sguar it, i.

CR-R
Colate the Aum
oquartey o Ae dawiatony ay detertmunod
in 4he beeading trep, an d dvide by he n. of þertiod (or
obhstwahos ) u) ome fo obtun
VartyanuL,t
wart n-
2-R
De divide the aum Of quatt of e dev iahon by n-| to actunt
ort he dsartee o dfterdom (doF. Dof rteferth to the, makiman ro.
oLogiall indehendenk valuey , duth arte valueu that have "4he
terdomto vart , in he data Sarple
Tte uLuse"po pulaton data, then the davidert oilt ten.
Co ot individualh ort
obherwaHon Aharte a
c L t ao o r L
 c a l u a e the Aquar Noot o he vartance to dekeromune

the Shandart dviaht on, i.e

Srandast deviahon vauance

oR
Tin h mea^urte of
Dt o rtisk and it
xplan yartiabiluky t
-R
9b Calulate gane Attoo Ae givendata
dlata dewiate ona
hotð many /. ot T, we Can Aay the
AHerhat
abou 61 Prtam e avertage rtare of rtekut)of 1--
wertae by
vale R
mkB rtekurtny Can be AummartiTad bq two
The histortital cabtal
,sush ana) Avetage rtaBe of
tekurtrn, b) standar deyjabji-
mumberts
avestage rteburt) in ponibe m
Risk PrtuM um, )he ighwt-runk
poxsible in hov Seurihe,
lo0-tunk avertaqe rtekturt)i
toek martket
)Trteasusty and
biu (T- bin) arte genertally arunk frtee hovt Steuruy. The
VS

uherte the varjabituf on ith rteturtn

ate fret om riK of delaut
the LoesA
Covt drbt obigahton basked by e Ttuaurt
Curt

T i n a shorth-tertn os
witha maturtyty of oneeart or l i
dept rtetwtn and Hhe aurtaae
thm avertage mKt
dPuune behioeen
D The a"RAK prtemum"
ig rtelertrte
q1-day Tbila
mkF s anothart meaurte Fort rtu prtemi
EXuh reckurtn o phe Stock