By the end of this section, the candidate should be able to:
Interpret interest rates as required rates of return, discount rates, or opportunity costs, and explain how an interest rate is composed of a real risk-free rate plus various risk premiums that compensate investors for bearing distinct types of risk.
Calculate and interpret different methods of measuring returns over time and identify their appropriate applications.
Compare and contrast money-weighted and time-weighted rates of return, and evaluate portfolio performance using these measures.
Calculate and interpret annualized return measures and continuously compounded returns, and determine their appropriate use cases.
Compute and interpret major return measures and explain their relevance in financial analysis and investment evaluation.