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Two essential measurements generally used in the investing and financial world are Hurdle Rate and Internal Rate of Return (IRR). Both of them are used for varying purposes. But there seems to be no end to the confusion they’ve caused among newcomers. So, if you cannot differentiate between hurdle rate and Internal Rate of Return (IRR), this post is meant to give you clarity. Let’s find out more about hurdle rate vs Internal Rate of Return here.  Know The Difference Between Hurdle Rate Vs Internal Rate Of Return What is Hurdle Rate? Also known as the minimum acceptable rate of return, the hurdle rate is the lowest rate of return that an investment or a project must earn to offset the investment’s costs. Projects are also assessed by discounting future cash flows to the current hurdle rate to calculate the Net Present Value (NPV).  This, in turn, showcases the difference between the current value of cash outflows and the current value of cash inflows. Usually, the hurdle rate is equal to a company’s capital costs, which is the amalgamation of the cost of debt and the cost of equity.  Typically, managers raise the hurdle rate either for such projects that are riskier or when the company is comparing several investment opportunities. Understanding Hurdle Rate This metric describes an adequate compensation for the current risk level. The hurdle rate lets companies make vital decisions on whether to pursue a specific project or not. If the anticipated rate of return goes above the hurdle rate, the investment is regarded as sound. If it goes below the hurdle rate, the investment is considered riskier.  To determine the hurdle rate, some of the essential areas that should be considered are: Associated risks Cost of capital Returns of other potential projects or investments Hurdle Rate Formula To calculate the hurdle rate, here is the hurdle rate formula that can be used: Hurdle rate = Cost of Capital + Risk Premium Hurdle Rate Example  Let’s consider an example to understand more about hurdle rate. Suppose you are looking forward to buying new machinery. As per the evaluation, with this new machine, you can increase the sales of your product, resulting in a return of almost 11% on the investment. The Weighted average cost of capital (WACC) for your company is 5%. The risk of not selling additional products is low. Thus, a low-risk premium got assigned at 3%.  Then, the hurdle rate will be: 5% (WACC) + 3% (Risk premium) = 8% Since the expected return on this investment is 11% and the hurdle rate is 8%, which is lower, buying the new machine will be a sound investment for you. Read About – Exponential Growth What is the Internal Rate of Return? The Internal Rate of Return (IRR) is the anticipated annual amount of money (expressed in percentage) that an investment is expected to generate for a company above and over the hurdle rate. The word “internal” denotes that the figure doesn’t account for possible external factors and risks, such as inflation. Also, IRR is used by financial experts and professionals to evaluate the expected returns on several stocks and investments, such as the yield to maturity on bonds. Learn Finance From Top 1% Understanding IRR (Internal Rate Of Return) Basically, the Internal Rate of Return (IRR) is one such discount rate that makes a project’s Net Present Value (NPV) zero. In simple words, it is the anticipated compound annual rate of return that will be earned on an investment or a project. You can only use IRR when looking at investments and projects with an initial cash outflow and one or more inflows. Moreover, this method doesn’t consider the possibility that various projects may have varying durations.  While it is comparatively straightforward to assess projects by comparing the IRR to the hurdle rate, this approach has specific limitations in the form of an investing strategy. For example, it considers only the rate of return, in contrast to the return’s size. A $10 investment returning $100 has a higher rate of return than a $10 million investment yielding $2 million.  Once you’ve determined the internal rate of return, it is generally compared to the cost of capital or a company’s hurdle rate. If the IRR equals or exceeds the cost of capital, the company will accept the project as a sound investment. And, if the IRR is lower than the hurdle rate, it will be rejected.  IRR Formula The IRR formula is as mentioned below:   Here,  NPV = Net Present Value N = Holding Period n = Each Period CF = Cash Flow IRR = Internal Rate of Return One can do the calculation of the internal rate of return in three varying methods: Using the XIRR or IRR function in a spreadsheet or Excel programs Through an iterative process where an analyst tries a variety of discount rates until the NPV is equal to zero Through a financial calculator IRR Example Before moving ahead with understanding IRR, you’ll first have to know Net Present Value (NPV). This is because the cash that you have today is far more valuable than the one you’ll get after five years, courtesy of inflation. Thus, when you think of investing money every year, you must first check its worth today.  So, let’s assume you invested Rs. 10 lakhs in a project X today. From the next year, this project will start making cash flows without the need for further investments. You can find more information on the money that you’ve invested today and the cash flows that it will generate in the future in the below-mentioned table. Time Period (Years) Cash Flow Today Rs. – 10 lakhs Year 1 Rs. 2 lakhs Year 2 Rs. 3 lakhs Year 3 Rs. 3 lakhs Year 4 Rs. 3.5 lakhs Year 5 Rs. 3.5 lakhs Total Cash flow Rs. 15 lakhs Now, to find out NPV of the cash flows mentioned above, suppose IRR is approximately 8% for the project

Wouldn’t it be great if you could have dinner sitting next to a friend who lives miles away from you? And that too, in the streets of Paris – from the comfort of your home? Sounds kind of impossible, right? Well, this might not be the case anymore. Welcome to the Metaverse! A virtual world with endless possibilities. A 3D world of the internet that is available to you constantly. As someone who belongs to Generation Z, I have had access to the internet from a young age. And the metaverse is something that I could see my generation readily adopting. In fact, there are already such virtual platforms in place, and they have captured quite a number of users. But what is not clear is what all does the metaverse actually encompass? If I ask 10 people, “What is the metaverse?”, they would give me 10 different definitions. So, what exactly is the metaverse? Is it just a temporary buzz or is it here to stay? Let’s find out. What does metaverse actually mean? The metaverse is a three-dimensional virtual internet simulation. It will allow users to behave and carry out all functions that they do in reality. Users will be able to do so along with millions of other users, within the virtual world. The metaverse is an extension of the present-day internet, and that too, a revolutionary extension. It will inherently change the way we look at all aspects of life, literally and otherwise. The word metaverse was first coined by Neal Stephenson in his 1992 sci-fi novel Snow Crash. In the book, people use digital avatars of themselves to eat, work, play in the virtual world. They do so as a means to escape their dystopian reality. And now, Facebook, or shall we say, “Meta”, is building on this very idea, minus the dystopia, of course. The metaverse is going to drastically change the way we interact with technology in our day-to-day lives. It will be characterized by virtual worlds, combined with the features of the physical world. These virtual worlds will go on to exist, even when you are not “playing” or interacting with them. Alternatively, it could also translate into a digital economy. That is, it will be a virtual space that allows users to create, buy and sell products and/or services. It would allow users to buy cars, clothes, accessories, and move them from one platform to another. “Doesn’t this kind of technology already exist?” The above description of metaverse might prompt you to think so. We already have virtual worlds in place. One example is the game – World of Warcraft, wherein players can buy and sell goods. A similar experience is rendered by Fortnite. In the game, you can attend live concerts and exhibits, and be in your own personal virtual home. You just need to strap on a VR/AR headset and you are good to go. However, the metaverse is not just limited to this. Metaverse will be based upon Web 3.0. It is the newest internet iteration with advanced, data-driven, and open websites. Its aim will be to create a level of transparency. This will happen because individual data will not be controlled by centralized organizations, rather it will be powered and stored on blockchains. Meta CEO, Mark Zuckerberg, is betting big on the idea of the metaverse. As per his vision, the metaverse will bring enormous opportunity to individual creators and artists; to individuals who want to work and own homes far from today’s urban centers; and to people who live in places where opportunities for education or recreation are more limited. A realized metaverse could be the next best thing to a working teleportation device, he says. And not just Meta, other tech companies are also moving fast in this space. Both Microsoft and Google are not far behind in this race to crack the metaverse technology. In fact, consumer brands like Walmart, Nike, Ralph Lauren, and Gap have also expressed interest in the metaverse. They have already started working on virtual landscapes. The metaverse will be a blockchain world, built on the Web 3.0 network, cryptocurrencies, and NFTs. NFTs are unique units of data stored on the blockchain. They track a specific digital asset’s ownership and transfers. Challenges ahead The metaverse seems pretty awesome. And it has gained quite the hype amongst the newer generations. However, there are still some challenges to combat and confusions to clear. No one is really sure what are the possibilities of Metaverse. And that is my major concern here. Meta wants to use the metaverse to make virtual houses, where people can invite their friends to hang out.  On the other hand, Microsoft wants to use the metaverse to create immersive virtual meeting rooms. These rooms will allow “people in different physical locations to join collaborative and shared holographic experiences, with the productivity tools of Microsoft Teams, where people can join virtual meetings, send chats, collaborate on shared documents and more.” Another important thing is who will control what the metaverse looks like? Who will control the type of content it hosts? Because surely, an open web network is bound to attract scammers and frauds. And if this metaverse is used by the younger generation as well, we can’t very well control who they interact with, or the type of content they consume. On the face of it, virtual worlds promise liberation and escape from the real world and feel like a digital utopia. The inhibitions, hierarchies, and limitations of the real world do not restrict these virtual worlds. Users can project whatever they want to do onto their digital avatars.  But this does not necessarily mean that the virtual world is better than the real world. Existing gaming platforms with metaversal characteristics have problems like worker exploitations, gender biases, and homophobia. Unless companies make conscious efforts to take care of these prejudices and biases, how can we say that the virtual world is better than the one we

A stock exchange is a focal place for investors and traders to buy and sell different financial securities such as stocks, Exchange-traded Funds (ETFs), and derivatives like options and futures. It brings buyers and sellers together under one roof to trade and profit from market inefficiencies (different between buying and selling prices). With advancements in this space, investors can trade across the country as well as globally with ease. In this article, we will talk about Indian stock exchanges, their history, different stock exchanges in India and more.  What is a stock exchange and how did it begin in India? In technical terms, a stock exchange is a platform permitted and authorized by the government that lets a company list itself and provides a marketplace for investors/traders to transact a company’s shares. In India, the Securities and Exchange Board of India (SEBI) regulates this space. In terms of market maturity, India is considered an emerging market because.  Established on August 31, 1957, the Bombay Stock Exchange (BSE) is India’s first official stock exchange. However, the history of the stock market in India is more vivid than this and dates back to the 19th century. The Native Share and Stock Broker’s Association was a known institution around 1875 for trading. It later became known as the predecessor of the Bombay Stock Exchange.  The Ahmedabad Stock Exchange began in 1894. However, it had the purpose to trade shares of textile mills; Ahmedabad was quite popular back then for its textile business. Followed by that, in different parts of the nation, new stock exchanges started to form, leading to where we are at present.  The stock market in India has its fair share of ups and downs, and as a result, in 1992, the regulatory body SEBI was established to ensure fair conduct and protect investors.  Learn Finance From Top 1% How many stock exchanges are there in India at present? 1. BSE (Bombay Stock Exchange Limited)  Established in the year 1875, BSE is India’s first official stock exchange platform. It is situated on the famous Dalal Street in Mumbai. 5500+ companies are listed on BSE, making it the 10th largest stock exchange globally. 2. NSE (National Stock Exchange of India) Inaugurated in 1992 and started functioning in 1994, NSE is a competitor of BSE. NSE is also India’s first electronic exchange. Because of that, investors across the country could buy and sell shares with more accessibility to the stock market. Since its inception, NSE has improved a lot on its tech part and innovations to provide better services to investors. 3. CSE (Calcutta Stock Exchange Limited)  CSE began in 1830 when a bunch of brokers gathered under a neem tree to seal their deals. This practice continued and in 1908, it officially became Calcutta Stock Exchange. Electronic trading was introduced at CSE in 1997; it is the second oldest stock exchange in the South Asia region. CSE is no longer in use, but the case against terminating is still pending in court which makes it an active exchange in India. 4. INDIA INX (India International Exchange) For international trading, INDIA INX leads the pack. Established on January 9, 2017, It is based in GIFT City, Gujarat at the International Financial Services Centre (IFSC). Investors can directly purchase and sell individual stocks on this exchange of nations such as the US, Canada, Australia, and Japan. INDIA INX has the Eurex T7 platform which is considered the most advanced tech in the world. 5. National Stock Exchange IFSC Limited Quite similar to INDIA INX in location and functioning, this exchange is a subsidiary of NSE. It was launched to help the nation attract better investment opportunities and expand its market size. 6. MCX (Multi Commodity Exchange of India) MCX, established in 2003, was initially formed under the Forward Market Commission and later merged with the SEBI. It is India’s first commodity exchange and is situated in Mumbai. It has also been ranked 7th in the largest commodity exchanges in the world. From gold to crude oil to wheat, a majority of commodities can be traded in MCX. 7. NCDEX (National Commodity and Derivatives Exchange) Established on April 23, 2003, NCDEX is an online commodity exchange having headquarters in Mumbai. NCDEX’s ownership is majorly divided between institutions, companies and large public banks. It is open 5 days a week between 10 am to 11:30 pm. 8. MSE (Metropolitan Stock Exchange of India Limited) MSE began its operations in 2009. Currently, there are 1500+ companies listed on this exchange. Just like BSE and NSE, investors can buy or sell individual stocks on MSE. It offers trading in various segments including debt, equity, derivatives, and more. 9. ICEX (Indian Commodity Exchange Limited) ICEX is a commodity derivative exchange which is regulated by SEBI. It was established in August 2017 and is located in Mumbai. It allows trading to registered brokers for trading contracts across the nations. It is a permanently recognized exchange in India and is completely unique as it allows the trade of diamond derivatives as well.  How do companies get into a stock exchange? There are two ways for a company to get itself on a stock exchange.  i) IPO (Initial Public Offering): When a company decides to get listed on a stock exchange (go public), it offers IPO in the primary market. Investors apply for IPO and those that get allotments, receive the shares of that company. ii) Trading on the secondary market: All the shares are traded on the secondary market. Once the shares are offered under an IPO, it gets traded on exchanges like BSE, NSE, etc.  Final Thoughts Stock exchanges provide a medium for companies to get funds and investors with opportunities to get returns. With time, technology has advanced and stock exchanges have evolved with innovations, becoming more transparent and seamless. Investors can choose any exchange as per the instruments they want to trade via registering themselves on a broking platform and opening a Demat account.

Introduction In today’s time, everybody who has a bank account have seen and used cheques and they play an important part whenever you need to transact money from these bank accounts. A cheque is a fundamentally important document that an individual, company and others use to withdraw or transfer money. There are various types of cheques available in our banking sector which have different requirements. So, let’s learn more about types of cheques. What is a cheque? A cheque is a document/paper which orders the bank to transfer money from the bank account of an individual or an organisation to another bank account. A cheque is a common form of a negotiable instrument. You need to have a savings bank account or current account in a bank, in order to issue a cheque in your own name or in favour of other parties, thereby ordering the bank to pay the said amount to whoever named in the cheque. It is one of the safest and convenient modes of payment transfers and you can transfer a high-value transaction without any hassle which would be very difficult if hard cash was used instead. This transaction needs to be handled very delicately as it can lead to some serious banking fraud. Parties to a cheque The parties that are involved with a cheque are:  Payee: The person named in the cheque who is to receive the payment  Drawee: The specific bank on which the cheque has been drawn   Drawer: The person who writes the cheque, who can be the account holder or the customer. The payee and drawer can be the same person.  Endorser: When the right to take the payment is transferred by the payee to another party, the payee is called an endorser. Endorsee: When the right to take the payment is transferred by the payee to another party, the party to which the right is transferred is called the endorsee. Features of a cheque    Cheques can be issued against savings or current accounts       A cheque is always drawn on a specified banker       It is an unconditional order       The payee of a cheque is fixed and certain and cannot be changed       The payment will only be made in the name of the payee/beneficiary       It is an instrument that is payable on demand ·        A cheque will be considered invalid if does not contain the date Types of cheques Open cheque An open cheque is a kind of leaf that a bank account holder can use to order the bank to make a payment to another party or deposit in his very own account. Bearer cheque In a bearer cheque, the money is made to a person who’s appearing on behalf of the payee/beneficiary, in whose name the cheque has been issued. In the leaf, it is a must to include the word ‘bearer’  in this kind of cheque. Self-Cheques A self-cheque is a cheque drawn in one’s very own call, because of this that the drawer and the payee are the same. You might write the word ‘’self’’  in the area for the drawee’s call at the cheque. It can simplest be encashed in the drawer’s financial institution. A self-cheque is to be used in conditions while you need to withdraw cash out of your very own account. It must be considered if one of these cheque falls in incorrect hands, it could be misused by any man or woman to withdraw cash from the financial institution from which the cheque is issued, so a self-cheque ought to be stored safely. Account Payee Cheques An account payee cheque is a bearer’s cheque that has the words ‘’account payee’’ written at the top left-hand side, within parallel lines, and crossed twice. This is also called a ‘’crossed cheque’’. It is the most secure way to issue a cheque as the amount written can be transferred only to that specific person’s account. Post-dated cheque A post-dated cheque is an account payee or crossed cheque that has a future date with a purpose to meet a financial obligation in future. It is legitimate for up to a few months from the date of the cheque’s issuance. Banker’s cheque Banker’s cheques are cheques which are issued by the bank so it guarantees payment. Traveler’s Cheque A traveler’s cheque is used when travelling as it is difficult to carry cash and coins and it is a more secure way. It may be encashed while travelling overseas wherein overseas forex is required. Stale Cheque A cheque in India is valid for 3 months from the date of issue. Any cheque which has been deposited three months after the date of the cheque being signed becomes a stale cheque. Blank Cheque A cheque which has all the fields blank except for the drawer’s signature, then it is called a blank cheque. Various parts of the cheque One needs to understand the different elements of the cheque to make sure that the cheque is written correctly. Here are some of the essential parts of the cheque-   Name of the bank is also called the drawee bank or payee bank  If there is a crossing on it and written a/c payee only, it is a directive to the bank to pay in the account of payee only.     In the pay section, you need to mention the name of the payee for whom you are making the cheque. Make sure that the name is spelt correctly. It is advised to draw a line on the space after writing the payee’s name so that no changes can be made.     In the date section, mention the date on which you want the money to be debited or transferred.     You should always cross the or bearer option so that if the cheque is stolen, it cannot be paid.     Mention the amount in words here and