CAPITALIZATION RATE Definition

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CAPITALIZATION RATE, also known as CAP RATE, is the rate of return a property will produce on the owners investment. It is stated as a rate of interest or discount rate used to convert a series of future payments into a single present value. In real estate, the rate includes annual capital recovery in addition to interest.

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DEMUTUALIZATION refers to the de-mutualizing of an insurance company. The proceeds from such an event are normally distributed to the policyholders in the form of cash, shares, or a combination thereof in the surviving entity.

EXCHANGE RATE RISK, in foreign exchange, is the variability of a firm's value due to uncertain changes in the rate of exchange.

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