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(1) The formula for the approximate expected return of an investment can look intimidating, but it's really.. just a function of three things: (1) average
(1) The formula for the approximate expected return of an investment can look intimidating, but it's really.. just a function of three things: (1) average annual current income, (2) average capital gains, and (3) the average value of the investment. Based on the information in the table, compute each of these values for the two stocks over a 3-year period and enter the values into the bottom half of the table. Stock 1 Stock 2 Average annual dividends (over three years) $1.10 $2.80 Current stock price $50 $109 Projected future stock price in three years) $62 $136 Average annual current income (CT) Average annual capital gains (CG) Average value of the investment (VI) Next, derive the correct formula for approximate expected return by correctly arranging these three variables in the equation that follows. Approximate Expected Return Approximate Expected Retur Using this formula, you can see that the approximate expected return for Stock 1 is and the approximate expected return for Stock 2 is True or False: If both investments carry the same rate of risk, Stock 1 is a better investment than Stock 2 True False
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