3 Factors that Influence Rate of Return
Any bondholder, or any investor for that matter, will allow three factors to influence his or her required rate of return. The three factors are the following: real (pure) rate of return, inflation, and risk premium. These three factors equal the risk free rate which is the rate of return of an investment with no risk of financial loss. This is also the rate that investors would expect from an absolutely risk-free investment over a period of time.

Inflation is the constant and progressive increase in the prices of goods and services. If the total rate of return was below the actual economic interest rates then this would cause the lender (investor) to pay the borrower for use of his or her funds. So instead of creating mass chaos in our economic system, the inflation premium of interest rates results from lenders compensating for expected inflation by pushing interest rates higher. An example that can derive from taking the inflation premium into account is that when inflation is high, or expected to decline, look for long-term fixed rate bonds to “lock in” high market values. The real rate of return and the inflation premium determine the risk free rate of return. As an example, if the real rate of return were 2 percent and the inflation premium 3 percent, then we can say that the risk free rate of return is 5 percent.

The real rate of return is described by our Corporate Finance book as the financial “rent” the investor charges for using his or her funds for one year. For example, if you make a $10,000 investment that earns 8% in one year, you would end the year with $10,800. So, you earn an extra $800, however, if inflation is at 3% for the year, your $10,800 is only worth $10,500. Your real rate of return is only 5%. Investors depending on dividends or interest from bonds are most affected by the costs of inflation. Stocks can be a little safer because companies can pass the higher cost of inflation...

...Factors That Influence Exchange Rates
Aside from factors such as interest rates and inflation, the exchange rate is one of the most important determinants of a country's relative level of economic health. Exchange rates play a vital role in a country's level of trade, which is critical to most every free market economy in the world. For this reason, exchange rates are among the most watched, analyzed and governmentally manipulated economic measures. But exchange rates matter on a smaller scale as well: they impact the real return of an investor's portfolio. Here we look at some of the major forces behind exchange rate movements. A higher currency makes a country's exports more expensive and imports cheaper in foreign markets; a lower currency makes a country's exports cheaper and its imports more expensive in foreign markets. A higher exchange rate can be expected to lower the country's balance of trade, while a lower exchange rate would increase it.
Determinants of Exchange Rates
Numerous factors determine exchange rates, and all are related to the trading relationship between two countries. Remember, exchange rates are relative, and are expressed as a comparison of the currencies of two countries. The following are some of the...

...
For this assignment I will be explaining 10 different factors which may influence communication and what different strategies there are currently available to overcome them in health and social care. The different factors I will be focusing on are: visual difficulties, hearing difficulties, language differences, problems with the environment, emotional issues, disabilities (physical and intellectual), body language, jargon, lack of time and cultural interpretations.
The first factor is visual difficulties, the spectrum for this type of sensory deprivation is very large because it can range from having slight difficulty, being short sighted or long sighted to being completely blind. The effect it has depends on the person, visual difficulties can occur either from birth, be genetically inherited or just be brought on through age. Regardless of this a person with a visual impairment when communicating may feel isolated and confused as they are unsure when they are being spoken to or what they may be missing. It could also prove very frustrating for the individual however there are many ways in which this difficulty can be overcome.
To begin with there is basically being a human and using common sense when it comes to the person. Due to everyone being different you would need to know what specific problems the service user has, whether their sight is better in one eye than the other and...

...yield plus the dividend yield on a security is called the:
A. geometric return.
B. average period return.
C. current yield.
D. total return.
2.
The expected return on a security in the market context is:
A. a negative function of execs security risk.
B. a positive function of the beta.
C. a negative function of the beta.
D. a positive function of the excess security risk.
E. independent of beta.
3.
A capital gain occurs when:
A. the selling price is less than the purchase price.
B. the purchase price is less than the selling price.
C. there is no dividend paid.
D. there is no income component of return.
4.
Which one of the following is a correct statement concerning risk premium?
A. The greater the volatility of returns, the greater the risk premium.
B. The lower the volatility of returns, the greater the risk premium.
C. The lower the average rate of return, the greater the risk premium.
D. The risk premium is not correlated to the average rate of return.
5.
You bought 100 shares of stock at $20 each. At the end of the year, you received a total of $400 in
dividends, and your stock was worth $2,500 total. What was your total return?
A. 45%.
B. 50%.
C. 90%.
D. 20%.
6.
You bought 100 shares of stock at $20 each. At the end of the year, you...

...Accounting rate of return
Accounting rate of return (also known as simple rate of return) is the ratio of estimated accounting profit of a project to the average investment made in the project. ARR is used in investment appraisal.
Formula
Accounting Rate of Return is calculated using the following formula:
ARR =
Average Accounting Profit
Average Investment
Average accounting profit is the arithmetic mean of accounting income expected to be earned during each year of the project's life time. Average investment may be calculated as the sum of the beginning and ending book value of the project divided by 2. Another variation of ARR formula uses initial investment instead of average investment.
Decision Rule
Accept the project only if its ARR is equal to or greater than the required accounting rate of return. In case of mutually exclusive projects, accept the one with highest ARR.
Examples
Example 1: An initial investment of $130,000 is expected to generate annual cash inflow of $32,000 for 6 years. Depreciation is allowed on the straight line basis. It is estimated that the project will generate scrap value of $10,500 at end of the 6th year. Calculate its accounting rate of return assuming that there are no other expenses on the project.
Solution
Annual Depreciation = (Initial Investment −...

...INTERNAL RATE OF RETURN
Many companies wants to have a return on their investment in a few years and begin to evaluate their projects optimistically calculating an internal rate of real return not yielding results in the end. This does not end up being expected by the companies; According to the article the authors John C. Kelleher and Justin J. MacCormack . They suggest that there is a tendency to a risky behavior, Companies started to run the risk of creating unrealistic numbers for themselves and shareholder expectations, which it could confuse communications with investors and inflating managerial rewards.
This confronts us with a real and serious problem when it comes to investing in projects because later we can not generate the expected return and risk of failure in the project, the IRR can generate two different values for the same project when future cash flows switch from negative to positive (or positive to negative). In addition, since the IRR is expressed as a percentage, and This can make small projects appear more attractive than large , although large projects with lower IRR may be more attractive as NPV of smaller projects with IRR .
The management of the IRR must be just when the project generates no interim cash flows - or when those interim cash flows really can be invested in real IRR otherwise would not be realistically analyzing the viability of the project,...

...Internal Rate of Return
Meaning of Capital Budgeting
Capital budgeting can be defined as the process
of analyzing, evaluating, and deciding whether
resources should be allocated to a project or
not.
Capital budgeting addresses the issue of
strategic long-term investment decisions.
Process of capital budgeting ensure optimal
allocation of resources and helps management
work towards the goal of shareholder wealth
maximization.
Why Capital Budgeting is so Important?
Involve massive investment of resources
Are not easily reversible
Have long-term implications for the firm
Involve uncertainty and risk for the firm
Capital Budget Techniques
Net PresentValue
Discounted
BenefitCost/Profitability
Index Ratio
IRR
Capital Budget
Techniques
Accounting Rate
of Return
Non Discounted
Payback
Period
Internal Rate of Return
The rate at which the net present value of cash
flows of a project is zero, I.e., the rate at which
the present value of cash inflows equals initial
investment
Project’s promised rate of return given initial
investment and cash flows.
Consistent with wealth maximization
Accept a project if IRR ≥ Cost of Capital
Question
The management is considering to acquire an
equipment costing $1,00,000 . It is expected that
the equipment will...

...Internal Rate of Return
Internal Rate of Return (IRR)
Calculation of the true interest yield expected from an investment. Explanation of Internal Rate of Return. What is Internal Rate of Return? Definition The Internal Rate of Return (IRR) is the discount rate that delivers a net present value of zero for a series of future cash flows. It is an Discounted Cash Flow (DCF) approach to valuation and investing. As is Net Present Value (NPV). IRR and NPV are widely used to decide which investments should be undertaken, and which investments not to make. Difference of IRR and NPV The major difference is that while Net Present Value is expressed in monetary units (Euro's or Dollars for example), the IRR is the true interest yield expected from an investment expressed as a percentage. Internal Rate of Return is the flip side of Net Present Value and is based on the same principles and the same calculations. NPV shows the value of a stream of future cash flows discounted back to the present by some percentage that represents the minimum desired rate of return, often your company's cost of capital. IRR, on the other hand, computes a break-even rate of return. It shows the discount rate below which an investment causes a positive...

...Factors that affect exchange rates.
Like any price, the exchange rate deviates from the cost basis - the purchasing power of currencies – under the influence of supply and demand of currency. The ratio of the supply and demand depends on several factors. It reflects connections with other economic categories - cost, price, money, interest, balance of payments, etc. There is a complex of interweaving and nomination of decisive factors. Among them are the following.
• 1.The rate of inflation. The ratio of currency in their purchasing power (purchasing power parity) serves as a kind of axis of the exchange rate reflecting the law of value. That's why the rate of inflation has an impact on the exchange rate. All other things being equal, the inflation rate in the country has inversely proportional impact on the value of national currency, i.e. an increase in inflation in the country leads to a reduction in the national currency, and vice versa. Inflationary depreciation of money in the country reduces the purchasing power and a tendency to a drop in their currency's exchange rate against currencies of countries where the rate of inflation is lower. Alignment of the exchange rate and adjustment to purchasing power parity are occurred within two years. This is because the daily...

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