When an investor invests in securities he expects two types of returns:
Periodic cash inflows and the Selling
Price to be received when it is sold.
Total return from an investment
can be calculated as
Total Return = Income + Price
Change
Rate of Return is calculated as
follows
Rate of Return = ((Income + Price
change) / Purchase price)* 100
Example:
Price at the beginning of an
equity share is 140. Price at the end was 160. The holder received a dividend
of rs 8. What would be the rate of interest.
Rate of Return = ((Income + Price
change) / Purchase price)* 100
= ((8+20)/140)*100
= 20%.
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