First, understand the expected rate of return.
Expected rate of return, also known as expected rate of return, refers to the rate of return that investors expect from investment under a certain risk level. It is an important reference index for investors' investment decision-making, which can help investors evaluate the risks and benefits of investment projects and make more reasonable investment choices.
Second, the calculation method of expected rate of return
1, historical rate of return method
The historical rate of return method is to calculate the average rate of return by analyzing the data of investment rate of return in the past period of time as an approximation of the expected rate of return. This method is suitable for long-term and stable investment projects, such as stocks and bonds. The calculation formula is:
Expected rate of return =( 1+ historical average rate of return) (1/ investment period)-1.
2. Market interest rate method
The market interest rate method refers to the average rate of return of similar investment projects in the market as the expected rate of return. This method is suitable for investment projects with fierce market competition and high information transparency, such as stocks and bonds. The calculation formula is: expected rate of return = average market rate of return.
3. Risk adjustment methods
Risk adjustment method is to adjust the expected rate of return according to the risk degree of investment projects. This method is suitable for high-risk investment projects, such as venture capital and private equity investment. The calculation formula is expected return = risk-free return+risk premium.
Among them, the risk-free rate of return refers to the rate of return that investors can get without taking any risks, usually based on the yield of national debt; Risk premium refers to the extra income required by investors in order to take risks, which is usually determined according to the risk level of investment projects.
Influencing factors of expected rate of return
I. Market environment
The change of market environment will affect the income level of investment projects, thus affecting the expected rate of return. For example, economic growth, inflation, policy changes and other factors may have an impact on investment income.
Second, the characteristics of investment projects
Different investment projects have different risk and return characteristics, so the expected rate of return will be different. For example, stock investment has high risk and great income potential, while bond investment is relatively stable.
Third, the risk tolerance of investors.
Investors' risk tolerance determines their requirements for expected rate of return. Generally speaking, investors with higher risk tolerance will pursue higher expected rate of return, while investors with lower risk tolerance will tend to choose investment projects with lower risk.