how to calculate the average rate of return on a stock?
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For example, suppose an investment returns the following annually over a period of five full years: 10%, 15%, 10%, 0%, and 5%. To calculate the average return for the investment over this five-year period, the five annual returns are added together and then divided by 5. This produces an annual average return of 8%.
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['To calculate the expected return of a portfolio, you need to know the expected return and weight of each asset in a portfolio.', "The figure is found by multiplying each asset's weight with its expected return, and then adding up all those figures at the end."]
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Calculating the Average Yield for a Portfolio Third, subtract your total ending value from the initial investment to find your gain or loss. Fourth, divide the gain or loss by the ending value to calculate the average yield as a decimal. Finally, multiply the result by 100 to convert it to a percentage.
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Add any dividends received during the time period to the increase in price to find the total gain. Continuing the example, if you received $3,000 in dividends, add $7,000 to $3,000 to get a total gain of $10,000. Divide the gain by the starting value of the portfolio to find the total rate of return.
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Divide the ending amount by the starting amount. For example, if you started with a $44,000 investment and ended with a $54,000 value, you would divide $54,000 by $44,000 to get 1.2273. Subtract 1 from the previous step's result to find the return expressed as a decimal.
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To accurately compare returns relative to your investment, divide the return by the initial investment and multiply by 100 to figure the return as a percentage. For example, if you earned a return of $350 by investing $2,800, divide $350 by $2,800 to get 0.125. Then, multiply by 100 to get a return of 12.5 percent.
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To calculate the year-to-date (YTD) return on a portfolio, subtract the starting value from the current value and divide by the starting value. Multiply by 100 to convert this figure into a percentage, which is more useful than the decimal format for comparisons of the returns of individual investments.
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While you can expect 7% — 10% annual returns from stocks over the long term, in the short term stock market returns will vary widely. They say that from 1926–2014 (89 years), the stock market returned an average of 10.2% per year.
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['Required Rate of Return = (2.7 / 20000) + 0.064.', 'Required Rate of Return = 6.4 %']
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Calculating Daily Return as a Percentage To calculate your daily return as a percentage, perform the same first step: subtract the opening price from the closing price. Then, divide the result by the opening price. Finally, multiply the result by 100 to convert to a percentage.
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['Calculate the average (mean) price for the number of periods or observations.', "Determine each period's deviation (close less average price).", "Square each period's deviation.", 'Sum the squared deviations.', 'Divide this sum by the number of observations.']
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If the investor sells the stock for $80, his per share gain is $80 - $60 = $20. In addition, he has earned $10 in dividend income for a total gain of $20 + $10 = $30. The rate of return for the stock is thus a $30 gain per share, divided by the $60 cost per share, or 50%.
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Subtract the start date share price from the end date share price plus the distribution amount previous calculated. Divide the result by the start date share price. Multiply the result times 100 to convert the result to a percentage investment return for the selected time period.
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['Rate of Return = (10 * 1000 – 5 * 1000) * 100 / 5 *1000.', 'Rate of Return = (10,000 – 5,000) * 100 / 5,000.', 'Rate of Return = 5,000 * 100 / 5,000.', 'Rate of Return = 100%']
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Simply stated, a stock's dividend yield is calculated by taking its dividend-per-share and then dividing it by its price-per-share. The result is then expressed in percentage terms.
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To figure the raw return on your initial investment of preferred stock, subtract the price you paid for the shares from the current price. Then, add the dividends you received per share you bought. Finally, multiply the result by the number of shares you bought to figure the raw return.
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["Absolute Return on Mr. A's investment over 3 years.", '= 30%', 'An absolute return is always expressed in the form of a percentage (%).', 'Annualised Return = (Final Investment Value ÷ Initial Investment Amount)^ (1/number of years) – 1.', 'Thus, Mr.']