Final answer:
The Holding Period Return is the return formula that describes the total realized or annual return on an investment, encompassing all forms of income and capital gains.
Step-by-step explanation:
The student is inquiring about which return formula refers to the total realized return or annual return on an investment. The correct answer is b) Holding Period Return. This measures the total rate of return on an investment over the period it was held, including capital gains and dividends or interest, and it can be expressed on an annualized basis if needed. Unlike the Holding Period Return, the Sharpe Ratio, Traynor Ratio, and Information Ratio relate returns to different measures of investment risk.
Expected Rate of Return, Risk, and Actual Rate of Return are fundamental concepts in investments. Expected Rate of Return forecasts potential returns from an investment, which could encompass capital gains and interest, and is commonly expressed as a percentage over a period. Risk evaluates the uncertainty that an investment's actual returns could differ from its expected returns, with high-risk investments having a broader range of possible outcomes. The Actual Rate of Return defines what an investor actually earns from an investment, including all forms of income and capital gains, over a period.