Corporate sustainability starts with a company’s value system and a principles-based approach to doing business. This means operating in ways that, at a minimum, meet fundamental responsibilities in the areas of human rights, labour, environment and anti-corruption. Responsible businesses enact the same values and principles wherever they have a presence, and know that good practices in one area do not offset harm in another. By incorporating the Ten Principles of the UN Global Compact into strategies, policies and procedures, and establishing a culture of integrity, companies are not only upholding their basic responsibilities to people and planet, but also setting the stage for long-term success. Show
The Ten Principles of the United Nations Global Compact are derived from: the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption. Human RightsPrinciple 1: Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human rights abuses. LabourPrinciple 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4: the elimination of all forms of forced and compulsory labour; Principle 5: the effective abolition of child labour; and Principle 6: the elimination of discrimination in respect of employment and occupation. EnvironmentPrinciple 7: Businesses should support a precautionary approach to environmental challenges; Principle 8: undertake initiatives to promote greater environmental responsibility; and Principle 9: encourage the development and diffusion of environmentally friendly technologies. Anti-CorruptionPrinciple 10: Businesses should work against corruption in all its forms, including extortion and bribery. What Is Expectations Theory?Expectations theory attempts to predict what short-term interest rates will be in the future based on current long-term interest rates. The theory suggests that an investor earns the same interest by investing in two consecutive one-year bond investments versus investing in one two-year bond today. The theory is also known as the "unbiased expectations theory."
Expectations TheoryUnderstanding Expectations TheoryThe expectations theory aims to help investors make decisions based upon a forecast of future interest rates. The theory uses long-term rates, typically from government bonds, to forecast the rate for short-term bonds. In theory, long-term rates can be used to indicate where rates of short-term bonds will trade in the future. Calculating Expectations TheoryLet's say that the present bond market provides investors with a two-year bond that pays an interest rate of 20% while a one-year bond pays an interest rate of 18%. The expectations theory can be used to forecast the interest rate of a future one-year bond.
In this example, the investor is earning an equivalent return to the present interest rate of a two-year bond. If the investor chooses to invest in a one-year bond at 18%, the bond yield for the following year’s bond would need to increase to 22% for this investment to be advantageous. Expectations theory aims to help investors make decisions by using long-term rates, typically from government bonds, to forecast the rate for short-term bonds. Disadvantages of Expectations TheoryInvestors should be aware that the expectations theory is not always a reliable tool. A common problem with using the expectations theory is that it sometimes overestimates future short-term rates, making it easy for investors to end up with an inaccurate prediction of a bond’s yield curve. Another limitation of the theory is that many factors impact short-term and long-term bond yields. The Federal Reserve adjusts interest rates up or down, which impacts bond yields, including short-term bonds. However, long-term yields might be less affected because many other factors impact long-term yields, including inflation and economic growth expectations. As a result, the expectations theory does not consider the outside forces and fundamental macroeconomic factors that drive interest rates and, ultimately, bond yields. Expectations Theory Versus Preferred Habitat TheoryThe preferred habitat theory takes the expectations theory one step further. The theory states that investors have a preference for short-term bonds over long-term bonds unless the latter pay a risk premium. In other words, if investors are going to hold onto a long-term bond, they want to be compensated with a higher yield to justify the risk of holding the investment until maturity. The preferred habitat theory can help explain, in part, why longer-term bonds typically pay out a higher interest rate than two shorter-term bonds that, when added together, result in the same maturity. When comparing the preferred habitat theory to the expectations theory, the difference is that the former assumes investors are concerned with maturity as well as yield. In contrast, the expectations theory assumes that investors are only concerned with yield. What is the principle that expresses that value is created by the expectation of future benefits?What is the economic principle of anticipation? The perception that value is created by the expectation of future benefit.
What principle states that value is affected by the expectation of future benefits?The principle of anticipation states that value is created by the anticipation of future benefits, which leads in fact to one definition of value as the present worth of future benefits.
Which principle of value holds that the value of any component?The appraisal principle that states that the value of any component of a property is what it gives to the value of the whole or what its absence detracts from that value.
Which principle of value describes the future benefits of a property as perceived by the buyer?The principle of anticipation is defined as: "The perception that value is created by the expectation of benefits to be derived in the future." This principle has its strongest application in the valuation of income-producing properties.
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Which principle holds that value is created by the expectation of benefits to be derived in the future?
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