KMV and Rate of return: Difference between pages
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' | The investor's return on an investment, expressed as a proportion of the amount invested. | ||
Most commonly expressed as a percentage. | |||
<span style="color:#4B0082">'''Example'''</span> | |||
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 == | == See also == | ||
* [[ | * [[Conventional year]] | ||
* [[ | * [[Effective annual rate]] | ||
* [[ | * [[Nominal annual rate]] | ||
* [[Periodic]] | |||
* [[Periodic rate]] | |||
* [[Real return]] | |||
* [[Return]] | |||
* [[Yield]] | |||
[[Category:Corporate_finance]] | |||
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.
