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The implicit rate of return refers to the rate of return that is assumed or inferred from the cash flows of an investment, rather than explicitly stated. It is often used in the context of evaluating the profitability of an investment by comparing the expected cash inflows to the initial investment. This rate can be calculated using methods such as internal rate of return (IRR) or through discounted cash flow analysis. Essentially, it helps investors assess the potential profitability of an investment based on its projected financial performance.
What else can I help you with?
Is implicit rate the same as imputed rate?
No, implicit rate and imputed rate are not the same. Implicit rate refers to the interest rate that is not explicitly stated but can be implied from the terms of a financial transaction. Imputed rate refers to an assumed interest rate used for certain financial calculations, such as valuing an asset or determining taxable income.
Is an investment an implicit cost?
Yes, investment is an implicit cost because it is a firm investing their own money in something that (by definition of an opportunity cost) could have been invested in something else. Investment is the opportunity cost of a firm using their own money, and whether or not the opportunity that the firm invested in is worthwhile is defined by the NROR (the normal rate of return).
How is expected rate of return calculated from average rate of return on investment and standard deviation?
The expected rate of return is simply the average rate of return. The standard deviation does not directly affect the expected rate of return, only the reliability of that estimate.
Are interest rate and rate of return the same?
Yes, the interest rate and rate of return are exactly the same.
Does the capital asset pricing model help us to get required rate of return or expected rate of return?
expected rate of return
Is the rate of return the same as the interest rate?
No, the rate of return is not always the same as the interest rate. The rate of return includes all gains and losses on an investment, while the interest rate is the cost of borrowing money or the return on an investment without considering other factors.
How can you have a negative real rate of return over the same period?
If the rate of inflation exceeds the nominal rate of return during the period in question, then the real rate of return can be negative.
How would you describe a rate of return?
An investment's rate of return is expressed as a percentage.
What is the difference between the required rate of return and the expected rate of return in investment analysis?
The required rate of return is the minimum return an investor needs to justify the risk of an investment, while the expected rate of return is the return that an investor anticipates receiving based on their analysis of the investment's potential performance.
What is formula for average rate of return?
Where Equals __RAverage rate of return Rt Return at time t TNumber of time points Where Equals u Average rate of return Ri i-th return n Number of observations Where Equals __RAverage rate of return Rt Return at time t TNumber of time points Where Equals u Average rate of return Ri i-th return n Number of observations
How does a change in the required rate of return affect project's Internal Rate Of Return?
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.
Risk free rate is 5 and the market risk premium is 6 What is the expected return for the overall stock market What is the required rate of return on a stock that has a beta of 1.2?
Expected return= risk free rate + Risk premium = 11 rate of return on stock= Riskfree rate + beta x( expected market return- risk free rate)
