Returns of Financial Assets and Instruments

Free CFA Level I lesson in Quantitative Methods. 12 min read, ~1,730 words.

Holding period return (HPR) = (Ending + Income) / Beginning − 1. Compound HPRs to chain multi-period returns. Geometric mean ≤ arithmetic mean, gap widening as volatility rises. Geometric measures realized compound growth; arithmetic measures expected single-period return. Money-weighted return = IRR (sensitive to cash flow timing). Time-weighted return =...

What this lesson covers

• Content
• Example 1
• Example 2
• Common Mistakes
• Check Your Understanding
• Exam Shortcuts

Learning objectives

• returns of financial assets and instruments

Browse all free CFA Level I lessons or jump into free CFA Level I practice questions.