Concept explainers
Return on Investment (ROI) refers to the benefit an investor enjoys from an investment made by him. When the return on investment is high it indicates that the income earned is profitable. It helps in evaluating the efficiency of an investment or in the comparison of performance of a number of investments.
Realized returns refer to the actual returns that are earned during the holding period of an investment. Realized returns include dividends, interest payments, and cash distributions. It carries the dividend amount with it. It can be measured in two ways, which are capital gain yield and dividend yield. The change in the prices from one period to another until the holding period or the appreciation that occurred in the market refers to capital gain yield. The increase in the price of a particular stock primarily due to the announcement of a dividend refers to dividend yield.
To determine:
The dividend yield and capital gain from the investment.
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Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
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