Total return analysis, Financial Management

A trade is assessed on the basis of its performance. Performance can be defined as the expected total return over and above the investment horizon of the trade. The returns would be from: coupon payment, the change in the value of the bond, and reinvestment income from reinvesting coupon payments and principal repayment.

For example, an investor purchases a security for Rs.1000 and expects a return of Rs.60 over a 1-year investment horizon. The expected total return is 6% (=Rs.60/Rs.1000). Suppose funds from repo markets are used to purchase securities. The interest cost is to be deducted from the total returns. For example, out of Rs.1000 investment, Rs.900 is from borrowing and only Rs.100 is from investor's own funds. Say the cost of borrowed funds is 5% that would amount to Rs.45. Now the total return would be Rs.60 - 45 = Rs.15. The total return would be 15% (=15/100).

Posted Date: 9/11/2012 1:45:15 AM | Location : United States

Related Discussions:- Total return analysis, Assignment Help, Ask Question on Total return analysis, Get Answer, Expert's Help, Total return analysis Discussions

Write discussion on Total return analysis
Your posts are moderated
Related Questions
State the term- Financing Decision The second financial decision is financing decision,which essentially addresses two questions: a. How much capital must be raised to fu

Sinking fund provisions is a pool of funds set aside to repay the debt. Under this, certain amount of money is kept aside every year form profit. It is then used

Can a corporation have too much working capital?  Explain. A firm can have in excess of working capital if it is losing the opportunity to invest in high returning fixed assets

The purpose of this financial analysis is to determine the economic viability during the last five years of the Lance Company and to advise our client on whether the acquisition of

•What categories and in what amounts should Jenny allocate her funds to reflect a balanced monthly budget? Include the main categories as well as examples of other categories.

given just the sales and profit values, how is the break-even sales calculated?

What are the Predator shareholders Predator company's shareholders mayn't approve the bid for various reasons. Reduction in EPS If consideration is

At the end of 1922, your great grandfather (g.g.f.) established a trust fund to be used in order to help a later generation of the family obtain a university education. The ultimat

The effective maturity of a callable bond can be anywhere between the first call date and its maturity date due to the presence of the call feat

What are the types of firms that securities firms and investment banking industry included? Into the USA, the securities firms and investment banking industry comprises several