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.
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ch10 Student: ___________________________________________________________________________ 1. The capital gains 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
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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
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2nd‚ 2014 1. You are considering investing in one of the these three stocks: Answer: B‚ B;A 2. Your friend is considering adding one additional stock to a 3-stock portfolio‚ to form a 4-stock portfolio. She is highly risk averse and has asked for your advice. The three stocks currently held all have b = 1.0‚ and they are perfectly positively correlated with the market. Potential new Stocks A and B both have expected returns of 15%‚ are in equilibrium‚ and are equally correlated with the
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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
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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
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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
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Internal Rate of Return In investment decision analysis you may need to calculate internal rate of return. “Internal rate of return (IRR) is the discount rate that gives the project a zero NPV” (McLaney‚ 2006). It is a good choice to use for investment projects. There is a formula for the internal rate of return: (A is the lower discount rate and B is the higher rate‚ a is the NPV at the lower rate and b is the NPV at the higher rate.) For example the Net Present Value (NPV) is 88 when the
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part one 1. Risk preferences Sharon Smith‚ the financial manager for Barnett Corporation‚ wishes to evaluate three prospective investments: X‚ Y‚ and Z. Currently‚ the firm earns 12% on its investments‚ which have a risk index of 6%. The expected return and expected risk of the investments are as follows: |Investment |Expected return |Expected risk | | | |index | |X |14% |7% | |y
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Chemical Kinetics Factors Affecting Reaction Rate OVERVIEW Chemical reactions occur at different rates. In this experiment you will consider some of the key factors that influence the rate of a reaction: nature of reactants - particle size temperature concentration catalysts According to the collision theory‚ the rate of a reaction depends on the frequency of collisions between reacting particles. The more frequent the collisions‚ the faster the rate of the reaction. However‚ in order
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