Risk and Return Measures - Sample Questions 1 - 5
- With respect to the internal rate of return on an investment (IRR):
- It is the weighted average term to maturity of a bond's cash flows.
- It strips out the cash flow bias for an investment's return.
- It is a simple period return.
- It is a dollar weighted return which assumes reinvestment at the IRR to maturity.
- All of the following are forms of dollar weighted return, except:
- Yield to Maturity.
- Yield to Call.
- Internal Rate of Return.
- None of the foregoing.
- The current yield of Varity Corp. 9.07 of 20 is:
- 8.9% if Varity's current market value is 102
- 10.4% if Varity trades presently at 874
- a & c
- b & c
- Taxable Equivalent Yield may be defined as:
- The different between a tax-exempt yield and a taxable yield.
- The rate at which the investor would be indifferent to the tax-exempt yield.
- The yield obtained by "grossing up" the tax-exempt yield by the reciprocal of the investor's marginal tax bracket.
- Both b & c
- None of the foregoing.
- The nominal return on an investment is 11.34%. The real return is:
- The nominal return adjusted for inflation.
- 7.57% using a 3% inflation assumption.
- 7.57% using a 3.5% inflation assumption.
- Both a & c
InvestingAny investor, private or institutional, should be aware of the diverse types and calculations of bond yields before an actual investment.
Bonds & Fixed IncomeA bond's current yield, also called "bond yield," is the interest it pays annually divided by the bond's price. A stock's current yield, also called "dividend yield," is the sum of its annual ...
Fundamental AnalysisUse this method to choose which project or investment is right for you.
Fundamental AnalysisRead about the similarities and differences between an investment's internal rate of return (IRR) and its return on investment (ROI).
Active TradingUsing yields to supplement earnings can mean big bucks, with the right strategy.
Fundamental AnalysisThere are numerous ways to value investments, and many investors prefer a specific valuation method. Yield investing is one way to value a stock by comparing the current price to various factors. ...
Bonds & Fixed IncomeA guide to help to understand the simple math behind fixed-coupon corporate bonds.
Bonds & Fixed IncomeThe bond equivalent yield calculates the semi-annual, quarterly or monthly yield on a discount bond or note.
TermInterest rates, bond yields and inflation expectations are all correlated.
Mutual Funds & ETFsWhen it comes to fixed income investing, yield is an important component of a bond investment’s total return to accurately assess if it's the right move.
The interest rate on a taxable security that would render a return ...
The yield of a bond, assuming that you reinvest the coupon (interest ...
Interest income that is not subject to federal income tax. Tax-exempt ...
A metric used in capital budgeting measuring the profitability ...
A security in which the income produced is free from federal, ...
The amount of return an investor will realize on a bond. Several ...
Read about the differences between yield and rate of return. See why many novice investors often struggle more with the concept ... Read Answer >>
Explore and understand the various meanings of the investment term "yield" as it is applied to equity investments and bond ... Read Answer >>
Learn about the different types of yield measurements for stocks and bonds, and find out how to make careful comparisons ... Read Answer >>
Determining various the various yields that callable bonds can provide investors is an important factor in the bond purchasing ... Read Answer >>
Understand how to calculate the internal rate of return (IRR) using Excel and how this metric is used to determine anticipated ... Read Answer >>
See why the modified internal rate of return is often a superior metric to the classic internal rate of return for assessing ... Read Answer >>