Returns, compounding and risk
Part of the Asset Management learning and recruiting path. Read the explanation and example, attempt the task, then open the self-check.
Know what to learn for your role.
From foundations to a work sample, with sources, tasks and self-checks.
Understand
Simple return uses starting capital; multi-period returns compound. Volatility measures dispersion and maximum drawdown measures peak-to-trough loss. They are not interchangeable, and fees affect realised returns.
Worked example
100 rising 10% becomes 110; falling 10% then leaves 99. Cumulative return is −1%, not zero.
Examples and numbers are educational, not employer questions, live market data or hiring criteria.
Practise and keep your output
Calculate a 20% fall followed by a 20% rise, then the gain needed to recover from 80 to 100.
Keep inputs and sources, assumptions, steps, results and uncertainties in your own document. Attempt independently before checking below.
After attempting: answer and self-check
Final value is 96, a −4% return. Recovering 80 to 100 requires 25%. Compound rather than adding percentages.
Official channels and further reading
Pathline authors these starter lessons. These supplementary field links do not imply provider review or endorsement. Confirm Hong Kong availability and eligibility separately.
- BlackRock · Students and graduates ↗
Explore student programmes by region and function; this is not a confirmed Hong Kong opening.
- CFA Institute · Investment Foundations ↗
Investment topic reference; the certificate course may be paid. Our starter lessons are free.