Unleveraged required return
The required return on an investment when the investment is financed entirely by equity (i.e. no debt). |
Similar financial terms
Unleveraged betaThe beta of an unleveraged required return (i.e. no debt) on an investment when the investment is financed entirely by equity.
Required yield
Generally referring to bonds, the yield required by the marketplace to match available returns for financial instruments with comparable risk.
Required return
The minimum expected return you would require to be willing to purchase the asset, that is, to make the investment.
Required reserves
The dollar amounts based on reserve ratios that banks are required to keep on deposit at a Federal Reserve Bank.
Leveraged required return
The required return on an investment when the investment is financed partially by debt.
Abnormal return
In event studies, the part of the return that is not predicted; the change in value caused by the event. Also referred to as excess return, benchmark adjusted.
Total return swap
A total return swap is an exchange of a return on a debt security for LIBOR plus a spread. The return on the debt security includes income such as coupons and the change in its value.
Internal Rate of Return (IRR)
The internal rate of Return (IRR) is the discount rate that equals the present value of a future steam of cash flows to the initial investment. The IRR can be thought of as the annualized rate of return (in percent) of an investment using compound interest rate calculations. The IRR calculation is very useful when a number of future cash flows on which an interest rate needs to be calculated.
Abnormal returns
Part of the return that is not due to systematic influences (market wide influences). In other words, abnormal returns are above those predicted by the market movement alone.
After-tax real rate of return
Money after-tax rate of return minus the inflation rate.
Annualized holding period return
The annual rate of return that when compounded t times, would have given the same t-period holding return as actually occurred from period 1 to period t.
Total return
In performance measurement, the actual rate of return realized over some evaluation period. In fixed income analysis, the potential return that considers all three sources of return (coupon interest, interest on interest, and any capital gain/loss) over some i nvestment horizon.
Total dollar return
The dollar return on a nondollar investment, which includes the sum of any dividend/interest income, capital gains or losses, and currency gains or losses on the investment. See also: total return.
T-period holding-period return
The percentage return over the T-year period an investment lasts.
Subperiod return
The return of a portfolio over a shorter period of time than the evaluation period.
Safety-net return
The minimum available return that will trigger an immunization strategy in a contingent immunization strategy.
Risk-adjusted return
Return earned on an asset normalized for the amount of risk associated with that asset.
Riskless rate of return
The rate earned on a riskless asset.
Return-to-maturity expectations
A variant of pure expectations theory which suggests that the return that an investor will realize by rolling over short-term bonds to some investment horizon will be the same as holding a zero-coupon bond with a maturity that is the same as that investment horizon.
Return on total assets
The ratio of earnings available to common stockholders to total assets.
Return on investment (ROI)
Generally, book income as a proportion of net book value.
Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholder equity (adjusted for stock splits). Result is shown as a percentage. Investors use ROE as a measure of how a company is using its money. ROE may be decomposed into return on assets (ROA) multiplied by financial leverage (total assets/total equity).
Return on assets (ROA)
Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets).
Return
The change in the value of a portfolio over an evaluation period, including any distributions made from the portfolio during that period.
Realized return
The return that is actually earned over a given time period.
Rate of return ratios
Ratios that are designed to measure the profitability of the firm in relation to various measures of the funds invested in the firm.
Portfolio internal rate of return
The rate of return computed by first determining the cash flows for all the bonds in the portfolio and then finding the interest rate that will make the present value of the cash flows equal to the market value of the portfolio.
Multiple rates of return
More than one rate of return from the same project that make the net present value of the project equal to zero. This situation arises when the IRR method is used for a project in which negative cash flows follow positive cash flows. For each sign change in the cash flows, there is a rate of return.
Money rate of return
Annual money return as a percentage of asset value.
Market return
The return on the market portfolio.
Cumulative abnormal return (CAR)
Sum of the differences between the expected return on a stock and the actual return that comes from the release of news to the market.
Risk-adjusted return on capital (RAROC)
Measures performance on a risk-adjusted basis. Calculated as the economic return divided by economic capital. RAROC helps determine if a company has the right balance between capital, returns and risk. The central concept in RAROC is economic capital: the amount of capital a company should put aside needed based on the risk it runs.
