收益率计算(英文).pptVIP

Rate of Return Definition A relative percentage method which measures the annual rate of return as a percentage of investment over the life of a project. In 1970, when Wal-Mart Stores, Inc. went public, an investment of 100 shares cost $1,650. That investment would have been worth $12,283,904 on January 31, 2002. What is the rate of return on that investment? Example: Meaning of Rate of Return Solution: 0 32 $12,283,904 $1,650 Given: P = $1,650 F = $12,283,904 N = 32 Find i: $12,283,904 = $1,650 (1 + i )32 i = 32.13% Rate of Return Suppose that you invested that amount ($1,650) in a savings account at 6% per year. Then, you could have only $10,648 on January, 2002. What is the meaning of this 6% interest here? This is your opportunity cost if putting money in savings account was the best you can do at that time! So, in 1970, as long as you earn more than 6% interest in another investment, you will take that investment. Therefore, that 6% is viewed as a minimum attractive rate of return (or required rate of return). So, you can apply the following decision rule, to see if the proposed investment is a good one. ROR (32.13%) MARR(6%) Return on Investment Definition 1: Rate of return (ROR) is defined as the interest rate earned on the unpaid balance of an installment loan. Example: A bank lends $10,000 and receives annual payment of $4,021 over 3 years. The bank is said to earn a return of 10% on its loan of $10,000. Loan Balance Calculation: A = $10,000 (A/P, 10%, 3) = $4,021 Unpaid Return on Unpaid balance unpaid balance at beg. balance Payment at the end Year of year (10%) received of year 0 1 2 3 -$10,000 -$10,000 -$6,979 -$3,656 -$1,000 -$698 -$366 +$4,021 +$4,021 +$4,021 -$10,000 -$6,979 -$3,656 0 A return of 10% on the amount still outstanding at the beginning of each year Rate of Return: Definition 2: Rate of return (ROR) is the break-even interest rate, i*, which equates the present worth o