Risk Management and Capital Budgeting

Depicts the compount annual return earned by the investor. THis method is preferred for evaluating long-term investments

Standard Deviation of the return / expected return

States that the Treasury securities market is divided into market segments by the various financial institutions investing in the market. Life insurance companies prefer long-term securities and therefore are an identifier of long-term interest rates

EFR = (1 + (Stated Interest Rate / Compounding Frequency)) ^^{Compounding Frequency power} -1

If inflation is expected to increase, interest rates are expected to rise and therefore, intermediate-term and long-term rates will be higher than short-term rates