Financial Risk Manager Part 1

The simple return is calculated using the formula:

$R_t = \frac{P_t - P_{t-1}}{P_{t-1}}$

For time 4: $R_4 = \frac{P_4 - P_3}{P_3} = \frac{95.67 - 97.50}{97.50} = \frac{-1.83}{97.50} = -0.01876923$

Converting to percentage: $-0.01876923 \times 100 = -1.876923\% \approx -1.88\%$

The calculation shows:

• Price at time 3 (P₃) = 97.50
• Price at time 4 (P₄) = 95.67
• Difference: 95.67 - 97.50 = -1.83
• Simple return: -1.83 / 97.50 = -0.01876923 = -1.88%

Therefore, the simple return at time 4 is -1.88%.