# How to Get Periodic Return In Corporate Finance

How to Get Periodic Return In Corporate Finance |

### How do you calculate the periodic return?

Invest in a financial asset we have
to evaluate that acid, and we evaluate based on return and the basis of risk
because both the risk and return factor is equally important.

If you are investing in any financial
asset, you ought to know how much return; it would give after a certain period,
and how much risk is involved in it?

We would see three methods to
calculate the return that is the **periodic return** arithmetic mean return and
geometric mean return,

And to calculate risk we would
observe the methods like standard deviation and beta where the standard deviation
would tell us about the individual risk involved in the asset,

And the beta value will give us a
proper risk evaluation in terms of the market, as well as the risk involved in
that financial asset.

### It will give coordination of both the figures. Let's get started with our periodic return.

What exactly periodic return is, is
the return from investment in financial assets over some time. Like, you have
invested in any kind of asset whether in bonds, whether in equity.

The return which you would be getting
out of it after the period for which you have invested say for one year,

Two years or five years whatever
period for which you have invested in that asset after that period is over,

Whatever returns you would be getting
out of it, whether in the form of the capital gain or the form of any cash
flow,

All those returns would be considered
as the periodic return. Now I would make try to make you understand how the return could be in form of a capital gain or how the return could be in the form of
cash flows.

Just imagine like the share, share,
which you bought the price of rupees. 10. Now the price, after the period for
which you have bought that share has been increased to safer.

#### How do you calculate HPR for a portfolio?

After three years it has increased to
rupees 15, the price rise it is about rupees five so that rupees five is your
capital gain.

Why is that capital gain occurring?
This is occurring because of the increase in the market price of the financial
asset in

Which you invested and see like when
you would be selling your share or when the period is over, you will be getting
a dividend of rupees,

#### Two what that dividend would be considered as the cash flows.

If the coupons are paid on bond and
if the dividends are paid on the share, or whether you are having a preference
shares or equity shares whatever is being paid to you as a cache.

That is considered as the cash flow
for you, but whatever you gain in the term of the market price increase on
market price decrease that is considered as capital gain or a capital loss.

The periodic return would combine all
these things whether the cash flows whether the capital gain all that benefits
which you would be

Getting after the investment in a particular financial asset, or those benefits would be considered as your
periodic return for that period for which you invested.

The characteristics of the periodic return total return on investment are considered including the price changes, as well as the cash flows during the period like

Just imagine if you wanted to
consider prices of the same financial assets in two to three countries like in
the fund in the Spain market or the Indian market or our market.

#### How do you calculate HPR for dividends?

You want to consider the price so how
would you do that, if the currencies are different, you won't get the accurate
value

Whether you're making the very you're
calculating the returns from different markets, you have to calculate that in
the same currency,

That it provides you with an accurate measure of the returns. The same denomination would also help in comparison to
returns from different markets of countries. So this is what he said.

No here's an example of how to
calculate the periodic return, so it's a very simple example just to give you a gist of how it is done.

Consider a share whose price at the
beginning when purchased was dollar 60 right at the end of the year, it's
raised to dollar 65, and dollar three was paid as a dividend.

Assured rich you bought $1 60. Now, you kept that share for one year. And after that, you find that the market price of your share has increased. It has increased to $1 65 so you're gaining, you're gaining like what I can.

#### What I said as capital gain,

You're gaining dollar five and dollar
three was paid you as a dividend, as promised, a dollar tree is what you get as
the reward of buying that share.

Now, what would be your periodic
return for that year, it would be calculated as the change in price. Plus, cash
flow is divided by price at the beginning.

It's just the change whatever gain
you're having. And that's why we are considering it, we are dividing it by
price at the beginning so at the beginning you would have in dollar 60.

After that, there was a change in the
price of dollar five, plus you got a cash flow in the form of a dividend of
dollar three.

That's your periodic return was the point
13 three, or you can say 13.33%, this was the return person which you get after
one year.

It's a very simple method to calculate
the return person which you get just you have to know the change in the price,

Whether it is occurring or not,
whether it is increasing or decreasing, whatever cash flows you are getting.
And what was the price at the beginning?