Rates and ReturnsLocked: included in All Access

What an interest rate is made of, and every way the curriculum measures a return: holding period, arithmetic, geometric, harmonic, trimmed and winsorized means, money- vs time-weighted, annualised, continuously compounded, and gross, net, after-tax, real and leveraged returns.

1. 1. What an interest rate is made ofAn interest rate prices the gap between money now and money later, and it is built from a real risk-free rate plus a premium for each risk the lender carries.Locked: included in All Access13 min
2. 2. Holding period returnA holding period return measures everything you earned over one stretch of time, price change plus income, relative to what you paid.Locked: included in All Access12 min
3. 3. Arithmetic and geometric mean returnsThe arithmetic mean is the typical single-period return; the geometric mean is the steady rate that would have produced the same ending wealth.Locked: included in All Access13 min
4. 4. Harmonic, trimmed and winsorized meansThe harmonic mean averages ratios applied to a fixed amount and damps large values; trimmed and winsorized means limit the pull of outliers.Locked: included in All Access13 min
5. 5. Money-weighted returnThe money-weighted return is the IRR of the investor's own cash flows: what the investor actually earned, given when and how much money went in and out.Locked: included in All Access13 min
6. 6. Time-weighted vs money-weighted returnThe time-weighted return strips out client cash flows, so it measures the manager; the money-weighted return measures the investor.Video · 7 minLocked: included in All Access14 min
7. 7. Annualised and continuously compounded returnsPut every return on a per-year basis by compounding it, and use continuously compounded (log) returns when you want returns that add up over time.Video · 6 minLocked: included in All Access14 min
8. 8. Gross, net, after-tax, real and leveraged returnsPeel a headline return down to what the investor keeps after fees, taxes and inflation, and remember that leverage magnifies whatever is left, both up and down.Video · 7 minLocked: included in All Access14 min