Record that every price so far discounts at a rate the market sets, and write down the 2008 case of a manager losing only 10% while typical managers lost 30% to 40%.
2
Return including dividends, Rit=Pit−1Dit+Pit−Pit−1
Write the one-period return in both of its equal forms, and compute one illustrative return from a starting price, an ending price and a dividend of your own choosing.
3
Excess return versus risk premium E[Rit]−rf
Define expected return, excess return Rit−rf and risk premium, state that an excess return is a realization of the premium, and record the 1900–2025 figures, 9.8% for US equities against 3.4% for T-bills.
4
Population and sample variance and standard deviation
Write μ, σ2=E[(R−μ)2] and σ, then the sample mean and the sample variance dividing by T−1, record the units of each, and compute σ^ from a few illustrative returns.