Contingent covenant and Rate of return: Difference between pages

Revision as of 16:51, 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%

@@ Line 1: / Line 1: @@
-''Loan documentation.''
+The investor's return on an investment, expressed as a proportion of the amount invested.
-A contingent covenant is a covenant in borrowings documentation which is contingent on a particular event or measure.
+Most commonly expressed as a percentage.
-A common example is a contingent covenant linked with the borrower's credit rating.
-The existence of such covenants is a very significant source of risk for borrowers which are close to the boundary where the covenant might be triggered, for example following any further deterioration in the borrower's credit rating.
+<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%'''
 == See also ==
-* [[Credit rating]]
+* [[Periodic]]
-* [[Covenant]]
+* [[Periodic rate]]
-* [[Maintenance covenant]]
+* [[Real return]]
-* [[Ratings trigger]]
+* [[Return]]
-* [[Springing covenant]]
+* [[Yield]]
+[[Category:Corporate_finance]]