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Value versus Growth - Krannert School of Management
Value versus Growth - Krannert School of Management

... Reserve Accord that allows the Treasury bill rates to vary freely. The mean monthly excess returns of the book-to-market deciles increase from 0.48% per month for the growth decile to 0.97% for the value decile. The value-minus-growth portfolio earns an average return of 0.48% with a volatility of 4 ...
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... hand, would secure to the company a fair return for the capital invested. By a fair return is meant that the company will be allowed as large a return on the capital invested in its enterprise (which will be net to the company) as it would receive if it were investing the same amount in other securi ...
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... necessarily a good indicator of the Fed’s short-term interest rate decisions. In the mid-2000s longer term rates remained stubbornly low even as the Fed hiked short-term rates. Given this disconnect between the Fed’s policy rates and the longer-term rates examined by Glaeser et al. (2012), the direc ...
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... invested in various asset classes in The average nominal arithmetic 1802 would have accumulated to (or mean) return on stocks is 9.0 by the end of 1990. These series per cent per year over the entire are referred to as total return period. Although this can be inindexes, because they assume terprete ...
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... Projects A and B are mutually exclusive, thus, only one of the projects can be chosen. As long as the cost of capital is greater than the crossover rate, both the NPV and IRR methods will lead to the same project selection. However, if the cost of capital is less than the crossover rate the two meth ...
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Present value

In economics, present value, also known as present discounted value, is the value of an expected income stream determined as of the date of valuation. The present value is always less than or equal to the future value because money has interest-earning potential, a characteristic referred to as the time value of money, except during times of negative interest rates, when the present value will be greater than the future value. Time value can be described with the simplified phrase, “A dollar today is worth more than a dollar tomorrow”. Here, 'worth more' means that its value is greater. A dollar today is worth more than a dollar tomorrow because the dollar can be invested and earn a day's worth of interest, making the total accumulate to a value more than a dollar by tomorrow. Interest can be compared to rent. Just as rent is paid to a landlord by a tenant, without the ownership of the asset being transferred, interest is paid to a lender by a borrower who gains access to the money for a time before paying it back. By letting the borrower have access to the money, the lender has sacrificed the exchange value of this money, and is compensated for it in the form of interest. The initial amount of the borrowed funds (the present value) is less than the total amount of money paid to the lender.Present value calculations, and similarly future value calculations, are used to value loans, mortgages, annuities, sinking funds, perpetuities, bonds, and more. These calculations are used to make comparisons between cash flows that don’t occur at simultaneous times. The idea is much like algebra, where variable units must be consistent in order to compare or carry out addition and subtraction; time dates must be consistent in order to make comparisons between values or carry out simple calculations. When deciding between projects in which to invest, the choice can be made by comparing respective present values of such projects by means of discounting the expected income streams at the corresponding project interest rate, or rate of return. The project with the highest present value, i.e. that is most valuable today, should be chosen.
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