Explain what is meant by the return on an investment. Differentiate between the two components of return—income and capital gains (or losses).
Answer to relevant QuestionsDefine and briefly discuss each of the following sources of risk. a. Business risk b. Financial risk c. Purchasing power risk d. Interest rate risk e. Liquidity risk f. Tax risk g Event risk h. Market risk What is a satisfactory investment? When the present value of benefits exceeds the cost of an investment, what can you conclude about the rate of return earned by the investor relative to the discount rate? Two investments offer a series of cash payments over the next 4 years, as shown in the following table: a. What is the total amount of money paid by each investment over the 4 years? b. From a time value of money ...Use a financial calculator or an Excel spreadsheet to estimate the yield for each of the following investments. Consider the historical data for an investment given in the accompanying table. a. Calculate the total return (in dollars) for each year. b. Indicate the level of return you would expect in 2015 and in 2016. c. Comment on ...
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