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Expected return on investment |
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Definition of Expected return on investmentExpected return on investmentThe return one can expect to earn on an investment. See: capital asset
Related Terms:Abnormal returnsPart of the return that is not due to systematic influences (market wide influences). In Absolute Right of ReturnGoods may be returned to the seller by the purchaser without restrictions. Accounting rate of return (ARR)A method of investment appraisal that measures accounting rate of return (ARR)the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow After-tax real rate of returnMoney after-tax rate of return minus the inflation rate. annual returnThe fund return, for any 12-month period, including changes in unit value and the reinvestment of distributions, but not taking into account sales, redemption, distribution or other optional charges or income taxes payable by any unitholder that would reduce returns. Annualized holding period returnThe annual rate of return that when compounded t times, would have Arithmetic average (mean) rate of returnArithmetic mean return. Arithmetic mean returnAn average of the subperiod returns, calculated by summing the subperiod returns Average accounting returnThe average project earnings after taxes and depreciation divided by the average Average rate of return (ARR)The ratio of the average cash inflow to the amount invested. book rate of returnAccounting income divided by book value. Book ReturnsBook yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets. Business Expansion InvestmentThe use of capital to create more money through the addition of fixed assets or through income producing vehicles. capital investment analysisRefers to various techniques and procedures Capital InvestmentsMoney used to purchase fixed assets for a business, such as land, buildings, or machinery. Also, money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses. CARs (cumulative abnormal returns)a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock. Cumulative abnormal return (CAR)Sum of the differences between the expected return on a stock and the Dividend reinvestment plan (DRP)Automatic reinvestment of shareholder dividends in more shares of a Dollar returnThe return realized on a portfolio for any evaluation period, including (1) the change in market Dollar-weighted rate of returnAlso called the internal rate of return, the interest rate that will make the Equity investmentThrough equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock. Ex post returnRelated: Holding period return Exante returnThe expected return of a portfolio based on the expected returns of its component assets and Excess return on the market portfolioThe difference between the return on the market portfolio and the Excess returnsAlso called abnormal returns, returns in excess of those required by some asset pricing model. expected capacitya short-run concept that represents the Expected future cash flowsProjected future cash flows associated with an asset of decision. Expected future returnThe return that is expected to be earned on an asset in the future. Also called the Expected returnThe return expected on a risky asset based on a probability distribution for the possible rates Expected ReturnThe total amount of money (return) an investor anticipates to receive from an investment. Expected return-beta relationshipImplication of the CAPM that security risk premiums will be expected standardstandard set at a level that reflects what Expected valueThe weighted average of a probability distribution. Expected ValueThe value of the possible outcomes of a variable weighted by the Expected value of perfect informationThe expected value if the future uncertain outcomes could be known Foreign direct investment (FDI)The acquisition abroad of physical assets such as plant and equipment, with Future investment opportunitiesThe options to identify additional, more valuable investment opportunities Geometric mean returnAlso called the time weighted rate of return, a measure of the compounded rate of guaranteed investment certificate (GIC)A GIC is an investment that gives you a guaranteed rate of return over a fixed period of time, usually between 30 days and 5 years. GICs are available from banks, trust companies, and other financial institutions. Guaranteed investment contract (GIC)A pure investment product in which a life company agrees, for a Holding period returnThe rate of return over a given period. Horizon returnTotal return over a given horizon. Incremental internal rate of returnIRR on the incremental investment from choosing a large project Internal rate of returnDollar-weighted rate of return. Discount rate at which net present value (NPV) Internal rate of return a. The average annual yield earned by an investment during the period held. Internal rate of returnThe rate of return at which the present value of a series of future Internal rate of return (IRR)A discounted cash flow technique used for investment appraisal that calculates the effective cost of capital that produces a net present value of zero from a series of future cash flows and an internal rate of return (IRR)The precise discount rate that makes the Internal Rate of Return (IRR)The discount rate that equates the present value of the net cash internal rate of return (IRR)the expected or actual rate of internal rate of return (IRR)Discount rate at which project NPV = 0. Inventory returnsInventory returned from a customer for any reason. This receipt InvestmentThe commitment of funds (capital) in anticipation of an increased Investment analystsRelated: financial analysts Investment bankFinancial intermediaries who perform a variety of services, including aiding in the sale of Investment BankerMiddleman between a corporation issuing new securities and the public. The middleman buys the securities issue outright and then resells it to customers. Also called an underwriter. investment centera responsibility center in which the manager Investment centreA division or unit of an organization that is responsible for achieving an adequate return on investment decisiona judgment about which assets will be Investment decisionsDecisions concerning the asset side of a firm's balance sheet, such as the decision to investment gradeBonds rated Baa or above by Moody’s or BBB or above by Standard & Poor’s. Investment grade bondsA bond that is assigned a rating in the top four categories by commercial credit Investment incomeThe revenue from a portfolio of invested assets. Investment managerAlso called a portfolio manager and money manager, the individual who manages a Investment product line (IPML)The line of required returns for investment projects as a function of beta Investment SpendingExpenditures on capital goods including new housing. Financial ''investments" and sales of existing assets are not included. Investment tax creditProportion of new capital investment that can be used to reduce a company's tax bill Investment Tax CreditA reduction in taxes offered to firms to induce them to increase investment spending. Investment trustA closed-end fund regulated by the investment Company Act of 1940. These funds have a Investment valueRelated:straight value. InvestmentsAs a discipline, the study of financial securities, such as stocks and bonds, from the investor's Legal investmentsinvestments that a regulated entity is permitted to make under the rules and regulations Leveraged required returnThe required return on an investment when the investment is financed partially by debt. Market returnThe return on the market portfolio. Money rate of returnAnnual money return as a percentage of asset value. Multiple rates of returnMore than one rate of return from the same project that make the net present value Mutually exclusive investment decisionsinvestment decisions in which the acceptance of a project Net investmentGross, or total, investment minus depreciation. Net Investmentinvestment spending minus depreciation. Net present value of future investmentsThe present value of the total sum of NPVs expected to result from Passive investment managementBuying a well-diversified portfolio to represent a broad-based market Passive investment strategySee: passive management. Portfolio internal rate of returnThe rate of return computed by first determining the cash flows for all the postinvestment auditthe process of gathering information Purchase returnsA contra account that reduces purchases by the amount of items purchased that were subsequently returned. qualified investments (Canada)Qualified investments is the term used for investments that can be held in an RSP. These investments generally include: rate of returnTotal income per period per dollar invested. Rate of Returnreturn on invested capital (calculated as a percentage). Often an investor has, as one of their investment criteria, a minimum acceptable rate of return on an acquisition. RATE OF RETURN ON STOCKHOLDERS’ EQUITYThe percentage return or profit that management made on each dollar stockholders invested in a company. Here’s how you figure it: RATE OF RETURN ON TOTAL ASSETSThe percentage return or profit that management made on each dollar of assets. The formula is: Rate of return ratiosRatios that are designed to measure the profitability of the firm in relation to various Realized returnThe return that is actually earned over a given time period. Regular Investment Plan (RIP)A plan under which you may make regular deposits of the same amount to your Mutual Funds account once a month, once every 2 weeks, or once a week. You can also make regular deposits up to four times a month on any dates you choose. reinvestment assumptionan assumption made about the rates of return that will be earned by intermediate cash flows from a capital project; NPV and PI assume reinvestment at the discount rate; IRR assumes reinvestment at the IRR Reinvestment rateThe rate at which an investor assumes interest payments made on a debt security can be Reinvestment riskThe risk that proceeds received in the future will have to be reinvested at a lower potential REIT (real estate investment trust)Real estate investment trust, which is similar to a closed-end mutual REMIC (real estate mortgage investment conduit)A pass-through tax entity that can hold mortgages
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