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Return-to-maturity expectations |
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Definition of Return-to-maturity expectationsReturn-to-maturity expectationsA variant of pure expectations theory which suggests that the return that an
Related Terms: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. Abnormal returnsPart of the return that is not due to systematic influences (market wide influences). In After-tax real rate of returnMoney after-tax rate of return minus the inflation rate. 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 maturityThe average time to maturity of securities held by a mutual fund. Changes in interest rates Average rate of return (ARR)The ratio of the average cash inflow to the amount invested. Balloon maturityAny large principal payment due at maturity for a bond or loan with or without a a sinking Biased expectations theoriesRelated: pure expectations theory. Cumulative abnormal return (CAR)Sum of the differences between the expected return on a stock and the Current maturityCurrent time to maturity on an outstanding debt instrument. 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 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. Expectations hypothesis theoriesTheories of the term structure of interest rates which include the pure 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 return on investmentThe return one can expect to earn on an investment. See: capital asset Expected return-beta relationshipImplication of the CAPM that security risk premiums will be Geometric mean returnAlso called the time weighted rate of return, a measure of the compounded rate of Holding period returnThe rate of return over a given period. Homogenous expectations assumptionAn assumption of Markowitz portfolio construction that investors 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) Leveraged required returnThe required return on an investment when the investment is financed partially by debt. Local expectations theoryA form of the pure expectations theory which suggests that the returns on bonds Market returnThe return on the market portfolio. MaturityFor a bond, the date on which the principal is required to be repaid. In an interest rate swap, the Maturity factoringFactoring arrangement that provides collection and insurance of accounts receivable. Maturity phaseA phase of company development in which earnings continue to grow at the rate of the Maturity spreadThe spread between any two maturity sectors of the bond market. Maturity valueRelated: par value. 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 Original maturitymaturity at issue. For example, a five year note has an original maturity of 5 years; one Portfolio internal rate of returnThe rate of return computed by first determining the cash flows for all the Projected maturity dateWith CMOs, final payment at the end of the estimated cash flow window. Pure expectations theoryA theory that asserts that the forward rates exclusively represent the expected Rate of return ratiosRatios that are designed to measure the profitability of the firm in relation to various Rational expectationsThe idea that people rationally anticipate the future and respond to what they see ahead. Realized returnThe return that is actually earned over a given time period. Remaining maturityThe length of time remaining until a bond's maturity. Required returnThe minimum expected return you would require to be willing to purchase the asset, that is, ReturnThe change in the value of a portfolio over an evaluation period, including any distributions made Return on assets (ROA)Indicator of profitability. Determined by dividing net income for the past 12 months Return on equity (ROE)Indicator of profitability. Determined by dividing net income for the past 12 Return on investment (ROI)Generally, book income as a proportion of net book value. Return on total assetsThe ratio of earnings available to common stockholders to total assets. Riskless rate of returnThe rate earned on a riskless asset. Safety-net returnThe minimum available return that will trigger an immunization strategy in a contingent Stated maturityFor the CMO tranche, the date the last payment would occur at zero CPR. Subperiod returnThe return of a portfolio over a shorter period of time than the evaluation period. T-period holding-period returnThe percentage return over the T-year period an investment lasts. Term to maturityThe time remaining on a bond's life, or the date on which the debt will cease to exist and Time to maturityThe time remaining until a financial contract expires. Also called time until expiration. Time-weighted rate of returnRelated: Geometric mean return. Total dollar returnThe dollar return on a nondollar investment, which includes the sum of any Total returnIn performance measurement, the actual rate of return realized over some evaluation period. In Unleveraged required returnThe required return on an investment when the investment is financed entirely Weighted average maturityThe WAM of a MBS is the weighted average of the remaining terms to maturity Weighted average remaining maturityThe average remaining term of the mortgages underlying a MBS. Yield to maturityThe percentage rate of return paid on a bond, note or other fixed income security if you 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: RETURN ON INVESTMENT (ROI)In its most basic form, the rate of return equals net income divided by the amount of money invested. It can be applied to a particular product or piece of equipment, or to a business as a whole. Accounting rate of return (ARR)A method of investment appraisal that measures 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 Return on capital employed (ROCE)The operating profit before interest and tax as a percentage of the total shareholders’ funds plus Return on investment (ROI)The net profit after tax as a percentage of the shareholders’ investment in the business. Target rate of return pricingA method of pricing that estimates the desired return on investment to be achieved from the Purchase returnsA contra account that reduces purchases by the amount of items purchased that were subsequently returned. Sales returnsA contra account that offsets revenue. It represents the amount of sales made that were later returned. internal rate of return (IRR)The precise discount rate that makes the return on assets (ROA)Although there is no single uniform practice for return on equity (ROE)This key ratio, expressed as a percent, equals net return on investment (ROI)A very general concept that refers to some return on salesThis ratio equals net income divided by sales revenue. Internal Rate of Return (IRR)The discount rate that equates the present value of the net cash MaturityThe date or the number of days until a security is due to be paid or Return on Common Equity RatioA measure of the percentage return earned on the value of the Return on Total Assets RatioA measure of the percentage return earned on the value of the Yield to MaturityThe measure of the average rate of return that will be earned on a 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 internal rate of return (IRR)the expected or actual rate of return of capitalthe recovery of the original investment (or principal) in a project return on capitalincome; it is equal to the rate of return multiplied by the amount of the investment return on investmenta ratio that relates income generated Internal rate of return a. The average annual yield earned by an investment during the period held. Maturity dateThe date when the issuer returns the final face value of a bond Yield to maturityA measure of the average rate of return that will be earned Internal rate of returnThe rate of return at which the present value of a series of future book rate of returnAccounting income divided by book value. expectations theory of exchange ratesTheory that expected spot exchange rate equals the forward rate.
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