1.9 Measuring Market Performance

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1.9 Measuring Market Performance

University of Texas at Austin
Fin 320f - Foundations of Finance
Foundations of Finance Documents

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An ounce of performance is worth pounds of promises Mae West American actress (1892 – 1980) Foundations of Finance 1.9 Measuring Performance  Assume you own an apartment building. How might it earn money for you?  Rent is a form of income; income is taxable when earned  Selling the building for more than its purchase price generates a capital gain; the gain is taxable when realized 2011 - 2023© H Toprac 3 How do real estate investors make money?  Income (taxable when earned) • Semi-annual interest is paid to bondholders • Quarterly dividends may be paid to stockholders  Capital gains (taxable when realized) • Capital gain: When the value of an asset rises above the price you paid for it • Capital loss: When the value of an asset falls below the price you paid for it 2011 - 2023© H Toprac 4 How do stock and bond investors make money?

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