Secured Loans
Theories of the term structure of interest rates which include the pure
expectations theory, the liquidity theory of the term structure, and the preferred
habitat theory. These theories hold that each forward rate equals the expected
future interest rate for the relevant period. These three theories differ, however,
on whether other factors also affect forward rates, and how.
Expectations theory of forward exchange rates
A theory of foreign exchange rates that states that the expected future spot
foreign exchange rate t periods from now equals the current t-period forward
exchange rate.
Expected dividend yield
Total amount of dividends received on the index during the life of a futures
contract or total dividends received for holding a stock on year. See: current
yield.
Expected future cash flows
Projected future cash flows associated with an asset.
Expected future return
The return that is expected to be earned on an asset in the future. Also called the
expected return.
Expected return
The expected return on a risky asset based on a probability distribution for the
possible rates of return. Expected return equals some risk free rate (generally the
prevailing U.S. Treasury note or bond rate) plus a risk premium (the difference
between the historic market return, based upon a well diversified index such as
the S&P 500 and the historic U.S. Treasury bond) multiplied by the assets beta.
The conditional expected return varies through time as a function of current
market information.
Expected return-beta relationship
Implication of the CAPM that security risk premiums will be proportional to beta.
Expected return on investment
The return one can expect to earn on an investment. See: capital asset pricing
model.
