W99NOONMT.1
1. The rate of return on any asset comes from two components.
What are they? (3)
Lecture 1 contains the definition of a return and Lecture 5 uses bonds as an example. The two components of rate of return are income generated from holding the asset (such as coupon payments on a bond) and capital gain (or loss) from selling the asset (see the bond example in lecture 5). If you sell the asset for more than you paid then part of your return comes from a capital gain. If you sell it for less than you paid, the part of your return comes from a capital loss.