Running head: UNDERSTANDING THE CONCEPTS

Understanding the Concepts
Freddie Bailey
FIN 100
Professor John Underwood
May 27, 2012

Identify the components of a stock’s realized return. A realized return is the amount of actual gain that is made on the value of a portfolio over a specific evaluation period. The components of a stock are realized return is dividends, distributions, and share price appreciation. Dividends play a very important role in stock realized dividends may be in the form of cash, stock or property. Most secure and stable companies offer dividends to their stockholders. High growth companies will not likely offer dividends, because all of their profits are reinvested to help sustain higher than average growth. Distribution in realized stock is either money a mutual fund pays its shareholder from the dividends or interest it earns or from capital gains, it realizes on the sale of securities in its portfolio. The term distribution is also used to describe certain actions a corporation takes. Share price appreciates is when a share increases in value, it appreciates (Anderson, 2001). Contrast systematic and unsystematic risk. Systematic risk is also known as the non-diversifiable risk. There is a relevant portion of an assist’s risk attributable to market factors that have an effect on all firms such as war, inflation, international incidents, and political events. Unsystematic risk also known as diversifiable risk represents the portion of an asset that is associated with random causes that can eliminated through diversification. Systematic risk cannot be eliminated through diversification and the combination of a security’s non-diversifiable risk and diversifiable risk is known as a total risk. Systematic risk is due to factors that affect the entire market consisting of investments policy changes,