Unifying Principle of Investment Returns
Consider the two financial scenarios described below. Explain how the fundamental method for determining the profitability (rate of return) is the same for both the bond investment and the bank loan, despite them being different types of financial activities. Support your explanation by identifying the 'what you put in' and 'what you get back' for each scenario.
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Introduction to Macroeconomics Course
Ch.6 The financial sector: Debt, money, and financial markets - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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The profitability of any investment can be understood through the general relationship: 1 + rate of return = (what you get back) / (what you put in). When applying this general principle to a standard loan from a lender's perspective, which components correctly correspond to 'what you put in' and 'what you get back'?
Unifying Principle of Investment Returns
The profitability of any investment can be understood through the general relationship:
1 + rate of return = (what you get back) / (what you put in). Match each specific investment scenario to the correct breakdown of its components according to this general formula.Unifying Investment Return Principles