Reinvestment Rate


Reinvestment Rate

The amount of interest that can be earned when money is taken out of one fixed-income investment and put into another. The reinvestment rate is the amount of interest the investor could earn if s/he purchased a new bond, if the same investor is holding a callable bond that is called due because interest rates have declined. If the original bond paid 5% and the new bond pays 3%, the reinvestment rate is 3%.

The possibility of such an interest-rate drop is called "reinvestment rate risk".

Anticipated reinvestment rates play a role in investors' decisions about what term to select when purchasing a bond or CD. An investor who expects interest rates to rise might select a shorter-term investment, under the assumption that the reinvestment rate when the bond or CD matures will be higher than the interest rates that can be locked into on longer-maturity investments today.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Reinvestment rate — The rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security. The New York Times Financial Glossary …   Financial and business terms

  • reinvestment rate — The rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security. Bloomberg Financial Dictionary …   Financial and business terms

  • reinvestment rate — interest rate for investing money that was released from a previous investment …   English contemporary dictionary

  • Reinvestment rate —   The rate at which an investor assumes interest payments made on a financial instrument can be reinvested over the lifetime of that financial instrument …   International financial encyclopaedia

  • reinvestment rate — The interest rate at which an investor is able to reinvest income earned on an existing investment …   Accounting dictionary

  • reinvestment rate — The interest rate at which an investor is able to reinvest income earned on an existing investment …   Big dictionary of business and management

  • Норма реинвестиций (REINVESTMENT RATE)  — Норма прибыли, при которой вкладываемые инвестиции можно реинвестировать …   Словарь терминов по управленческому учету

  • reinvestment effect — The impact of a change in interest rates on the reinvestment rate. Bloomberg Financial Dictionary …   Financial and business terms

  • Reinvestment risk — is one of the main genres of financial risk. The term describes the risk that a particular investment might be canceled or stopped somehow, that one may have to find a new place to invest that money with the risk being there might not be a… …   Wikipedia

  • Rate of return — In finance, rate of return (ROR), also known as return on investment (ROI), rate of profit or sometimes just return, is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested.… …   Wikipedia


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