homework help

WORKING WITH TIME-VARYING RATES OF RETURN

Personalized homework help for all major subjects.

Order confidently with our risk free, 14-day money-back guarantee.

  • ✔️ No sign-up required
  • | 🔒 100% Confidential

Our Expert Writers

We proudly boast a team of expert professionals with verified academic credentials, selected for their proven skills and flexibility through a strict process.

Engage with experts from the top universities across the globe.

Submit Your Homework

Let our experts help you with your college homework

Please enable JavaScript in your browser to complete this form.

Benefits & Guarantees

plagiarism free policy

Plagiarism free

plagiarism free policy

Strictly confidential

plagiarism free policy

On-time delivery

plagiarism free policy

Affordable pricing

plagiarism free policy

Unlimited revisions

plagiarism free policy

24/7 Support

In practical, the rate of return is different from the theoretical value, which depends upon the time of payment. The rate of return also depends on whether the bonds are short-termed or long-termed.

5.1 A    HOW TO COMPOUND DIFFERENT RATES OF RETURN

Let us take an example to understand this. Say, the rate of return of the 1st year is 20% and the rate of return of the 2nd year is 30%, then what will be the 2-year holding rate of return? This can be determined by using the two 1-year compounding formula as given below:

Working with Time-Varying Rates of Return 1

Putting r0, 1=20, r1, 2 =30, we get r0, 2 =56%.

The compounding formula is not applicable only for a period of two years. It can be used for determining the holding rate of return in the future. For example, let us assume that the 1-year rate of return is 30% from 1st year to 2nd year, 40% from 2nd year to 3rd year, and 50% from 3rd year to 4th year, then the holding rate of return for the next 3 years, starting from next year is giving by:

Working with Time-Varying Rates of Return 2

Putting the values, we get r1, 4 = 173%. Say, if your investment is $1, then at the end of three years, you will receive $1 and an extra of $1.73 dollar, making the total amount received equal to $2.73.

The rate of interest which begins from the present moment, denoted by a 0 subscript are called spot rates and the interest which begins in the future are called future rates.

REVIEW QUESTIONS

  1. Find the total interest rate when the first year interest rate is 2% and it is 3% for the second year.
  2. A 2-year project has returned 22% in its 1st year but overall it has lost half of its value. Calculate the rate of return after the 1st
  3. The year and the annual rate of return of S&P 500 of year has been given in the table. Study the table given below and answer the question:

Working with Time-Varying Rates of Return 3

Find the rate of return over the first six years and the second six years. Also, calculate the rate of return over the entire period of 12 years.

  1. There are a loss of one-third of the value of a project in the 1st year, in the 2nd year it gained 50% of its value and in the third year, it lost two-thirds of its value, and finally in the 4th year, the value doubled. Calculate the rate of return over the entire period.

5.1 B   ANNUALIZED RATE OF RETURN

An easy way of measuring the interest accumulated by money over a period of time,is estimated by considering the average annual rate of return, which is defined as annualized rates.

Let us understand this by taking an example. If the holding rate of return is 173% over a period of three years, the annualized rate of return will not be given by 173%/3, i.e. 57.7%. This is because this value ignores the compound interest calculated on the interest earned after the first and second years. Instead, a single hypothetical rate of interest needs to be found out which is given by . This equation is given by

Working with Time-Varying Rates of Return 4

Where the holding rate of return, r0, t is for a period of 3 years and hence r0.3 is 173% as per the example taken. We need to find the annualized rate of return . This is given by the following generalized formula:

Working with Time-Varying Rates of Return 5

It should be noted here that compounding is analogous to adding and annualizing is analogous to averaging.

REVIEW QUESTIONS

5.A value is earning interest at the rate of 5% over four months. Calculate the annualized rate of return.

6.If the two-year holding rate of return is 40%, then, the average rate of return is 20% per year. Calculate the annualized rate of return and compare it with the average rate.

  1. Give your answer with reasons whether the compound rate is lower or higher than the sum of the individual rates of return, and also whether the annualized rate is lower or higher than the average of individual rate of return.
  2. For five years, if the total holding rate of interest is 50%, then calculate the annualized rate of return.

9.For each of the next five years, if the rate of interest is 10% per year, find out the annualized 5-year rate of return.

5.1 C   RELATION OF PRESENT VALUE AND TIME-VARYING INTEREST RATE

The net present value of the time-varying interest rate is given by:

Working with Time-Varying Rates of Return 6

Where NPV is the net present value and PV is the present value of that particular year which is given in bracket.

 

Links of Previous Main Topic:-

Links of Next Financial Accounting Topics:-

Your Price: $11.00 $10.00

Pricing may change based on requirements

Descriptive text for the image

Get Homework Help In

Maths and Statistics

Science

Humanities & Arts

l

Essay Writing

How Our Homework Service Works

FAQ number 1

Share your requirements

FAQ number 2

Make secure payment

FAQ number 3

Get homework answers

FAQ - Frequently Asked Questions

Discover quick answers in our FAQ, covering the most common customer questions about our homework help service.

Is your homework service confidential?

M
L

Absolutely! Confidentiality is one of the basic guarantees of our service at MyHomeworkHelp.com.

When our customers make their homework orders, they know their information remains 100% confidential.

Even your homework writer will not be provided with your personal details. So, when you hire a professional homework helper on our website, rest assured that your information will remain private and safe.

For a comprehensive understanding of how we protect your privacy, please refer to our Privacy Policy.

Who will help me with my homework?

M
L

We work with subject experts from all over the world. We hire them with the help of complex tests in the disciplines of their expertise. We also verify the IDs and academic transcripts of our homework writers to be sure that our experts have a bachelor's or master’s or a PhD degree. This is how we can be sure of the proficiency of our panel of experts who will help you with your homework.

Is it legal to ask for help with homework?

M
L

Seeking homework help is perfectly fine and shows your proactive approach to overcoming challenges. But it's important to use our homework service to enhance your understanding, not to replace your own efforts.

Our homework service offers original solutions for personal use, including:

  • Generating ideas or arguments for your research.
  • Deepening your subject comprehension.
  • Direct citation, with proper referencing.

However, it's crucial to avoid plagiarism by not submitting our work as your own. Make sure to check your institution's academic integrity policies before using our services. Our goal is to support your educational journey in a responsible and beneficial way. Refer our honor code for more details.

Is myhomeworkhelp.com legit?

M
L

Yes, myhomeworkhelp.com is completely legitimate. We've been successfully connecting students with top experts worldwide since 2012, offering direct, secure communication for a seamless learning experience. With over thousands of students helped and a commitment to innovative, effective education tools, we're dedicated to making learning easier and more accessible for everyone.

You can read our reviews here on Trustpilot and Sitejabber (Independent, verified reviews from buying customers) like you!

Is there a possibility of plagiarism in my completed order?

M
L

Unlike our competitors who use cheap and ineffective in -house plagiarism software, MyHomeworkHelp.com uses credible software to check your homework solution originality. We guarantee that your paper will pass TurnItIn checks with a low percentage of similarity. In addition, we also check submitted papers for ai-content using Originality.ai.

You will receive a complemantary plagiarism free report with your completed order.

What makes you one of the best homework help website?

M
L

We are not number 1 (yet!). We're an independent, bootstrapped business standing up to Big EdTech for last 12 years. So it means a lot that folks like you are willing to consider our services for your educational needs.

Myhomework Help is recognized as one of the premier websites for homework answers for three key reasons.

  1. Firstly, we pride ourselves on the expertise and qualifications of our tutors/experts, who are selected through a rigorous vetting process to ensure they can provide best academic assistance across a wide range of subjects.
  2. Secondly, our response time to student inquiries is fast (as early as few minutes), reflecting our understanding of the importance of timely support in an academic setting.
  3. Lastly, we keep our pricing very student friendly. Our aim is to provide the best learning experience to students like yourself without burning a hole in your pockets.