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This is a return of US$20,000 divided by US$100,000, which equals 20 percent. The US$20,000 is paid in 5 irregularly-timed installments of US$4,000, with no reinvestment, over a 5-year period, and with no information provided about the timing of the installments. The rate of return is 4,000 / 100,000 = 4% per year.
Return on investment (ROI) or return on costs (ROC) is the ratio between net income (over a period) and investment (costs resulting from an investment of some resources at a point in time). A high ROI means the investment's gains compare favourably to its cost. As a performance measure, ROI is used to evaluate the efficiency of an investment or ...
The expected return (or expected gain) on a financial investment is the expected value of its return (of the profit on the investment). It is a measure of the center of the distribution of the random variable that is the return. [1] It is calculated by using the following formula: where. is the return in scenario ; is the probability for the ...
Sharpe ratio. In finance, the Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) measures the performance of an investment such as a security or portfolio compared to a risk-free asset, after adjusting for its risk. It is defined as the difference between the returns of the investment and the ...
The yield to maturity (YTM), book yield or redemption yield of a fixed-interest security is an estimate of the total rate of return anticipated to be earned by an investor who buys it at a given market price, holds it to maturity, and receives all interest payments and the capital redemption on schedule. [1][2] It is the theoretical internal ...
Sustainable finance. v. t. e. In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". [1] It is used to evaluate new projects of a company.
Risk-free rate. The risk-free rate of return, usually shortened to the risk-free rate, is the rate of return of a hypothetical investment with scheduled payments over a fixed period of time that is assumed to meet all payment obligations. [1]
The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Importantly, it is dictated by the external market and not by management. The WACC represents the minimum return that a company ...