Year beginning of year price Dividend paid 2015 125 2 2016 141 2 2017 120 2 2018 125 2 An investor buys six shares of this stock at the beginning of 2015, buys another beginning of 2016 sells one share at the beginning o 2017 sells all remaining share on 2018 What are the arithmetic and geometric average weighted rate of return for the investor? What is the dollar-weighted rate of return?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
| Year | beginning of year price | Dividend paid |
| 2015 | 125 | 2 |
| 2016 | 141 | 2 |
| 2017 | 120 | 2 |
| 2018 | 125 | 2 |
An investor buys six shares of this stock at the beginning of 2015, buys another beginning of 2016 sells one share at the beginning o 2017 sells all remaining share on 2018
What are the arithmetic and geometric average weighted rate of return for the investor? What is the dollar-weighted rate of return?
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