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Tuesday, March 19, 2013

Calculation of Returns in Stock Marketing



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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