Hybrid and Rate of return: Difference between pages

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(Expand the page for different annual bases of quoting rates.)
 
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1.
The investor's return on an investment, expressed as a proportion of the amount invested.


Hybrid is a term used to describe a financial instrument which displays characteristics of both debt and equity.
Most commonly expressed as a percentage.


Such instruments might be designed to be an intermediate (or mezzanine) category of capital between equity and debt, or to have some of the risk absorbing characteristics of equity and, ideally, the tax efficiency of debt.


These are 'hybrid' financial instruments.
<span style="color:#4B0082">'''Example'''</span>


GBP 1 million is invested.


2. ''Tax''.
GBP 1.03 million is repayable at the end of the period.  


The term 'hybrid' can also refer to an entity which is treated differently for tax purposes in different tax jurisdictions.


The rate of return per period (r) is:


3. ''Green finance - greener technology''.
r = (End amount / Start amount) - 1


The use - in a single system - of both traditional and greener technologies.


For example, vehicles that can run either on electric batteries or more traditional fuels such as petrol or diesel.
''Which can also be expressed as:''


r = (End / Start) - 1


4.
''or''


More broadly, any structure, instrument or entity with mixed, or intermediate, characteristics between two or more other, simpler or standardised structures.
r = <math>\frac{End}{Start}</math> - 1


:<span style="color:#4B0082">'''''Intra-day net settlement'''''</span>


:"There are two basic ways that domestic clearing systems settle:
= <math>\frac{1.03}{1}</math> - 1


= 0.0300


:* end-of-period net settlement; and
= '''3.00%''' per period
:* real-time gross settlement.




:A third option is a hybrid of these two: intra-day net settlement. This is practised by a number of systems, such as the US Clearing House Inter-bank Payment System (CHIPS) and the Faster Payments Scheme in the UK."
=== Basis of quoting rates of return ===


:''Payments and payment systems - the Treasurer's Wiki.''
The rate of return in the example above has been calculated and stated on a periodic basis.


 
Rates of return are often also quoted on an annual basis, following the conventional quoting convention for the market in which the proposed deal is being quoted.
The term 'hybrid' originates from horticulture and farming, where hybrid plants and animals are a biological cross between two different species or breeds.




== See also ==
== See also ==
* [[Clearing House Interbank Payment System]]
* [[Conventional year]]
* [[Convertible debt]]
* [[Effective annual rate]]
* [[Faster Payments Service]]
* [[Nominal annual rate]]
* [[Green finance]]
* [[Periodic]]
* [[Hybrid debt]]
* [[Periodic rate]]
* [[Hybrid capital]]
* [[Real return]]
* [[Hybrid clearing and settlement systems]]
* [[Return]]
* [[Hybrid cloud]]
* [[Yield]]
* [[Hybrid entity]]
* [[Hybrid mismatch arrangement]]
* [[Hybrid pension scheme]]
* [[Mezzanine]]
* [[Payments and payment systems]]
* [[Preference shares]]
* [[Settlement]]
* [[Ten Point Plan for a Green Industrial Revolution]]
* [[Warrant]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Corporate_finance]]
[[Category:Long_term_funding]]

Revision as of 17:01, 19 November 2015

The investor's return on an investment, expressed as a proportion of the amount invested.

Most commonly expressed as a percentage.


Example

GBP 1 million is invested.

GBP 1.03 million is repayable at the end of the period.


The rate of return per period (r) is:

r = (End amount / Start amount) - 1


Which can also be expressed as:

r = (End / Start) - 1

or

r = <math>\frac{End}{Start}</math> - 1


= <math>\frac{1.03}{1}</math> - 1

= 0.0300

= 3.00% per period


Basis of quoting rates of return

The rate of return in the example above has been calculated and stated on a periodic basis.

Rates of return are often also quoted on an annual basis, following the conventional quoting convention for the market in which the proposed deal is being quoted.


See also

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