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
The Manager or Management Company The firm sponsoring the Fund could often structure it as a management company. Its primary responsibility is to determine investment strategie

evaluation and maintenance of MIS

Do you provide assignment help on Cash Flows Vs Accounting Profits. Do you have experts in this topic? Please suggest me if you can give me help with this topic.

Price-Yield Relationship of a Callable Bond The price-yield relationship of a non-callable or a non-puttable bond is convex because price and yield are inversely proportional.

The Walter's model, thus relates the question of distributing the dividends and retaining the earnings to the investment opportunities that are available with the firm. (i) If a

Benefits of Issue of Securities Initial Public Offering (IPO) of securities gives instant recognition and visibility to the firm, helps to attract and retain skilled personnel,

What is the essential condition for a fixed-for-floating interest rate swap to be possible? For a fixed-for-floating interest rate swap to be feasible it is essential for a quali

lease finance and its types

Report based on Capital Investment Plans   To analyze the capital investment plans of Hatsun Agro Products Limited (HAPL) we shall look at the capital expenditure of HAPL in

Peak Inc. needs to order Canadian raw materials to use in its production process. The Canadian exporter typically invoices Peak in Canadian dollars. Assume that the current exchang