Capital gains

Topic 

Capital gains

Instructions 

1. Understand how capital gains and percentage returns are calculated.
2. Explain the difference between average stock returns and risk-free returns.
3. Explain how the Sharpe Ratio is used to manage risk.
4. Describe the significance of US equity risk premiums as a method of comparison with other countries.

Answer Preview 

Capital gains are returned one gets from investing in a capital asset. As studies indicate, it is the measure of the gains asset holder gains. Capital gains come up when a capital asset is transferred. It is calculated by subtracting the original price from the current price and divide by the original price. Percentage returns on the other hand are the weighted returns from an investment.  This is used to calculate stocks that are normally distributed.

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