About This Chapter
Accounting Risk & Return - Chapter Summary and Learning Objectives
This chapter takes you through the calculation of risk and return. Learn the best way to measure returns and a theory of how markets work efficiently. These lessons are designed to be multifaceted in order to enhance comprehension and retention of the subject matter. This chapter covers the following topics:
- Dollar and percentage returns
- Rate of return
- Standard deviation and variance
- Normal distribution
- The history of capital markets
- Average returns
- Capital market efficiency
|Percentage vs. Dollar Returns||Look at the difference between dollar and percentage returns.|
|How to Calculate the Rate of Return: Definition, Formula & Example||Learn to calculate average returns and risk premiums and study the historical record.|
|Standard Deviation & Variance in Finance||Explore the calculation of variances and standard deviations.|
|Normal Distribution: Definition, Properties, Characteristics & Example||Discover why normal distribution is useful.|
|The History of Capital Markets||Examine how the history of capital markets can be used.|
|Geometric vs. Arithmetic Average Returns||Learn the difference between arithmetic and geometric averages.|
|Capital Market Efficiency & Price Behavior||Study the efficient markets hypothesis and its limitations.|
1. Percentage vs. Dollar Returns
In this lesson, we will discuss the difference between percentage and dollar amount returns on investments. By the end of the lesson, you will be able to calculate and compare these figures.
2. How to Calculate the Rate of Return: Definition, Formula & Example
In this lesson, we will define the rate of return and explore how it's used in today's business decisions. Using the formula and an example, we'll learn how to calculate the rate of return to determine if a particular business decision is a wise one.
3. Standard Deviation & Variance in Finance
Quantitative analysis in finance is an important tool if you want to actively manage an investment portfolio. In this lesson, we'll learn how to use and calculate standard deviation and variance - two important considerations in financial analyses.
4. Normal Distribution: Definition, Properties, Characteristics & Example
In this lesson, we will look at the Normal Distribution, more commonly known as the Bell Curve. We'll look at some of its fascinating properties and learn why it is one of the most important distributions in the study of data.
5. The History of Capital Markets
Wall Street has been a hub for financial markets since the 1700s, but other financial markets existed long before that. This lesson discusses the history of financial markets and how they have developed into the intricate systems they are today.
6. Geometric vs. Arithmetic Average Returns
The way many people calculate averages doesn't necessarily give an accurate picture of investment returns. In this lesson we will compare geometric and arithmetic averages and learn how they impact investment return math.
7. Capital Market Efficiency & Price Behavior
Information is a valuable commodity in investing, but in the modern stock market, information is easily available. In this lesson, we will review the efficient market hypothesis and how information availability explains market price behavior.
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Other chapters within the Finance 101: Principles of Finance course
- Introduction to Corporate Finance
- Financial Statements, Taxes & Cash Flow
- Financial Statement Basics
- Long-Term Financial Planning & Growth
- Introduction to Valuation Methods
- Discounted Cash Flow Valuation
- Interest Rates & Bond Valuation
- Stock Valuation
- Net Present Value & Investment Basics
- Capital Investment Decisions
- Return, Risk, & the Security Market Line
- Options & Corporate Finance
- Cost of Capital
- Financial Leverage & Capital Structure
- Dividends & Dividend Policy
- Short-Term Financing & Planning
- Cash & Liquidity Management
- Credit & Inventory Management
- International Corporate Finance
- Studying for Finance 101