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The PI is a financial tool that helps investors assess the potential profitability of a project or investment. It’s calculated by dividing the present value of expected future cash flows by the ...
Given that the same amount of money is invested each time, the return from dollar cost averaging on the total money invested is [3] = ~, where is the final price of the investment and ~ is the harmonic mean of the purchase price.
The term internal refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or financial risk. The method may be applied either ex-post or ex-ante. Applied ex-ante, the IRR is an estimate of a future annual rate of return.
The reason for investment being inversely related to the Interest rate is simply because the interest rate is a measure of the opportunity cost of those resources. If the resources instead of financing the investment could be invested in financial assets, there is an opportunity cost of (1+r), where r is the interest rate.
There are different types of inflation that could affect your long-term savings and investments. One such type is called cost-push inflation, which happens when prices go up because production ...
is the expected inflation rate g {\displaystyle g} is the real growth rate in earnings (note that by adding real growth and inflation, this is basically identical to just adding nominal growth) Δ S {\displaystyle \Delta S} is the changes in shares outstanding (i.e. increases in shares outstanding decrease expected returns)
Speculative demand is inversely related to the interest rate. As the interest rate rises, the opportunity cost of holding money rather than investing in securities increases. So, as interest rates rise, speculative demand for money falls. Money supply is determined by central bank decisions and willingness of commercial banks to loan money.
The asset demand for money is inversely related to the market interest rate. This is because at a lower interest rate, more people will expect a rise in the interest rate (and thus a fall in aftermarket bond prices).