![]() It can be used to compare a particular stock’s risk to the risks of other stocks. Stock beta or βi is a measurement of the volatility of a stock as compared to the market. Under the time value of money, your current money could potentially grow more because of the potential returns that you could enjoy if it was invested. The time value of money represents the idea that a sum of money that you currently hold is worth more than the same amount of money in the future. This takes into account the time value of money. When you use the discount rate in the context of the discounted cash flow analysis, you are using the discounted cash flow to analyze the present value or worth of your expected future cash flows. The discount rate and the discounted cash flow of investments can help you to determine the current value of your future flows of cash that you can expect to receive in the future. The discount rate may also be used to refer to rate of interest that is used in the analysis of the discounted cash flow of investments. The discount rate may be used to refer to the interest rate that is charged to financial institutions by the Federal Reserve for loans that they take out. Returns that are calculated evaluate past returns and might not accurately reflect future returns.Assumes that you can lend and borrow at a risk-free rate. ![]()
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