Want this question answered?
YTM
expected rate of return
They take less risk, theoretically, so they have lower expectations.
Relationship btwn an investor's required rate of return and value pf security
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
required rate of return is the 'interest' that investors expect from an investment project. coupon rate is the interest that investors receive periodically as a reward from investing in a bond
YTM
par value
11.04 12.40 13.76 15.00 9.42
A change in the required rate of return will affect a project's Internal Rate of Return (IRR) by potentially shifting the project's feasibility. If the required rate of return increases, the project's IRR needs to be higher to be considered acceptable. Conversely, a decrease in the required rate of return could make the project's IRR more attractive.
The nominal annual rate of return is calculated from the effective interest rate. It is typically a slightly lower percentage, and gives investors an idea of what their investment may return.
An increase in a firm's expected growth rate would normally cause its required rate of return to
On average, the only return that is earned is the required return-investors buy assets with returns in excess of the required return (positive NPV), bidding up the price and thus causing the return to fall to the required return (zero NPV); investors sell assets with returns less than the required return (negative NPV), driving the price lower and thus the causing the return to rise to the required return (zero NPV).
expected rate of return
They take less risk, theoretically, so they have lower expectations.
Question 4 How does the cost of debt differ from the required rate of return for bondholders?
Question 4 How does the cost of debt differ from the required rate of return for bondholders?