Single-period investment

(noun)

An investment that takes place over one period, usually one year.

Related Terms

Examples of Single-period investment in the following topics:

  • Single-Period Investment

    • What is the value of a single-period, $100 investment at a 5% interest rate?
    • If you plan on leaving the money there for one year, you're making a single-period investment.
    • Any investment for more than one year is called a multi-period investment.
    • Let's go through an example of a single-period investment.
    • Since this is a single-period investment, t (or n) is 1.

  • Single-Period Investment

    • When considering a single-period investment, n is one, so the PV is simply FV divided by 1+i.
    • The amount of time is also represented by a variable: the number of periods (n).
    • All of these variables are related through an equation that helps you find the PV of a single amount of money.
    • When considering a single-period investment, n is, by definition, one.
    • The FV is related to the PV by being i% more each period.

  • Calculating the Yield of a Single-Period Investment

    • The yield of a single period investment is simply $\frac { \left( FV\quad -\quad PV \right) }{ PV } \ast 100%.$ .
    • In short, it's how much you get back on your investment.
    • The whole point of making an investment is to get a yield.
    • Nominal APR is simply the interest rate multiplied by the number of payment periods per year.
    • Differentiate between the different methods of calculating yield of a single period investment

  • Multi-Period Investment

    • Multi-period investments require an understanding of compound interest, incorporating the time value of money over time.
    • With single period investments, the concept of time value of money is relatively straightforward.
    • With these variables, a single period investment could be calculated as follows:
    • With multi-periods in mind, interest begins to compound.
    • All and all, the difference from a time value of money perspective between single and multiple period investments is relatively straightforward.

  • Return on Investment

    • Return on investment (ROI) is one way of considering profits in relation to capital invested.
    • Return on investment (ROI) is one way of considering profits in relation to capital invested.
    • The purpose of the "return on investment" metric is to measure per-period rates of return on dollars invested in an economic entity.
    • For a single-period review, just divide the return (net profit) by the resources that were committed (investment):
    • Return on investment = (gain from investment - cost of investment) / cost of investment

  • The Importance of Aggregate Decisions about Consumption versus Saving and Investment

    • Money can either be consumed, invested, or saved (deferred consumption or investment).
    • Savings is essentially deferred consumption or investment; it is intended for use in the future.
    • While this is correct at the microeconomic, single good level, at the aggregate level this is incorrect.
    • Aggregate demand met by the market is spending, be it on consumption, investment, or other categories.
    • Through investment spending, savings influences aggregate demand.

  • Number of Periods

    • In , nrepresents the number of periods.
    • A period is just a general term for a length of time.
    • The length of one period must be the same at the beginning of an investment and at the end.
    • In compound interest, the interest in one period is also paid on all interest accrued in previous periods.
    • Define what a period is in terms of present value calculations

  • Advantages of the Payback Method

    • Payback period as a tool of analysis is easy to apply and easy to understand, yet effective in measuring investment risk.
    • Payback period in capital budgeting refers to the period of time required for the return on an investment to "repay" the sum of the original investment.
    • As a stand-alone tool to compare an investment to "doing nothing," payback period has no explicit criteria for decision-making (except, perhaps, that the payback period should be less than infinity).
    • The payback period is an effective measure of investment risk.
    • Payback period method is suitable for projects of small investments.

  • The Value of Diversification

    • Each asset class has specific investment objectives; these are typically stated in a prospectus or investment description.
    • However, all investments have some degree of risk in meeting the stated investment objectives or return.
    • Diversification strategies can be as simple as not "placing all your eggs in one basket. " It can also be as complex as a routine evaluation of investment correlation and risk, and dynamic rebalancing of investment holdings.
    • For example, stock and bonds provide different returns; while a stock may exhibit no growth for a period of time, the bond may continue to pay its coupon and provide a return.
    • Diversification can reduce the risk of any single asset, but there will still be systematic risk (or undiversifiable risk).

  • Types of Investments: Dependence on Ownership Share

    • Types of investments include: 20% to 50% (as an asset), greater than 50% (as a subsidiary), and less than 20% (as an investment position).
    • A share is a single unit of ownership in a corporation, mutual fund, or any other organization.
    • In the investor's income statement, the proportional share of the investee's net income or net loss is reported as a single-line item.
    • The DJIA depicts the volume of shares traded over a specific period of time.
    • Distinguish between a 20% to 50%, greater than 50% and less than 20% investment