Leveraged and Periodic yield: Difference between pages

Revision as of 10:55, 25 October 2015

A rate of return - or cost of borrowing - expressed as the proportion by which the amount at the end of the period exceeds the amount at the start.

GBP 1 million is borrowed.

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

The periodic yield (r) is:

(End amount / start amount) - 1

= (1.03 / 1) - 1

= 0.03

= 3%

GBP 0.97 million is borrowed.

GBP 1.00 million is repayable at the end of the period.

The periodic yield (r) is:

(End amount / start amount) - 1

= (1.00 / 0.97) - 1

= 0.030928

= 3.0928%

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-Leveraged usually means financed with a relatively large proportion of debt.
+A rate of return - or cost of borrowing - expressed as the proportion by which the amount at the end of the period exceeds the amount at the start.
+==Example 1==
+GBP 1 million is borrowed.
-.
+GBP 1.03 million is repayable at the end of the period.
-Leveraged cash flow is the cash flow taking account of debt.
+The periodic yield (r) is:
-.
+(End amount / start amount) - 1
-A leveraged company or business is one that is financed by a relatively large amount of debt.
+= (1.03 / 1) - 1
+= 0.03
-.
+= 3%
-The term 'leveraged' can also be used to refer to any non-zero level of debt finance, not necessarily a high level.
+==Example 2==
+GBP  0.97 million is borrowed.
+GBP 1.00 million is repayable at the end of the period.
-''Leveraged is also sometimes known as 'geared' or 'levered'.''
+The periodic yield (r) is:
+(End amount / start amount) - 1
-== See also ==
+= (1.00 / 0.97) - 1
-* [[Gearing]]
-* [[Guide to risk management]]
-* [[Hedge fund]]
-* [[Leverage]]
-* [[Leveraged finance]]
-* [[Leveraged takeover]]
+= 0.030928
-==Other resource==
+= 3.0928%
-[http://www.treasurers.org/node/8012 Masterclass: Measuring financial risk, Will Spinney, The Treasurer]
-[[Category:Corporate_finance]]
-[[Category:Long_term_funding]]
+==See also==
+*[[Annual effective rate]]
+*[[Discount rate]]
+*[[Periodic discount rate]]
+*[[Yield]]