How does TARP affect the economy?

July 7, 2024 No Comments

A: TARP – or the Troubled Asset Relief Program – is a government program created in response to the subprime mortgage crisis that began in 2007. The original goal of the program was to give the U.S. Treasury $700 billion in purchasing authority to buy

How do hurdle rate MARR and internal rate of return IRR relate?

July 7, 2024 No Comments

A: In capital budgeting, projects are often evaluated by comparing the internal rate of return (IRR) on a project to the hurdle rate, or minimum acceptable rate of return (MARR). Under this approach, if the IRR is equal to or greater than the hurdle rate, the

How do I calculate a discount rate over time, using Excel?

July 7, 2024 No Comments

A: The discount rate is the interest rate used when calculating the net present value (NPV) of something. NPV is a core component of corporate budgeting and is a comprehensive way to calculate whether a proposed project will add value or not. For this article, when we look at the discount

How do I calculate the expected return of my portfolio in Excel?

July 7, 2024 No Comments

A: The expected return of your portfolio can be calculated using Microsoft Excel if you know the expected return rates of all the investments in the portfolio. Using the total value of your portfolio, the value of each individual investment, and its respective return rate,

How do I calculate the Macaulay duration of a zero-coupon bond in Excel?

July 7, 2024 No Comments

A: The resulting Macaulay duration of a zero-coupon bond is equal to the time to maturity of the bond. A zero-coupon bond is a type of fixed-income security that does not pay interest on the principal amount. However, to compensate for the lack of coupon

How do I calculate yield of an inflation adjusted bond?

July 7, 2024 No Comments

A: Standard yield calculation methods still apply to inflation-adjusted bonds, only investors are more likely to pay attention to real yield with an inflation-adjusted bond. Inflation-adjusted bonds have yields that appear to be lower than non-adjusted (nominal) bonds. The bond yields for inflation-adjusted bonds are

How do I calculate yield to maturity of a zero-coupon bond?

July 7, 2024 No Comments

A: Zero-coupon bonds do not have re-occurring interest payments, which makes their yield to maturity calculations different from bonds with a coupon rate. Most time value of money formulas require some interest rate figures for each point in time. This makes the yield to maturity

How do I use the holding period return yield to evaluate my bond portfolio?

July 7, 2024 No Comments

A: The holding period return yield formula can be used to compare the yields of different bonds in your portfolio over a given period. This method of yield comparison enables investors to determine which bonds are generating the largest profit. In addition, this formula can

How Do Low Rates Affect the Demand for Bonds?

July 7, 2024 No Comments

A: The lower interest rates that are found on bonds, especially government-backed bonds, are often not seen as enough by investors. This is the main driving force behind certain investors not wanting to invest in bonds. The Impact of Low Rates on Bond Investing Many investors

How do open market operations (OMOs) affect bond prices?

July 7, 2024 No Comments

A: Open market operations (OMOs) directly influence the money supply, which in turn impacts interest rates. Interest rates are negatively correlated with bond prices due to opportunity cost. Thus, central banks can indirectly affect bond prices through the purchase or sale of debt securities on

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