Reinvestment premise

The reinvestment premise states that certain returns or surpluses of money will be reinvested . It occurs in the following economic models:

• Internal rate of return (all capital returns are reinvested at the internal rate of return)
• Net present value (interim accumulated surpluses are immediately invested at the discount rate)
• Standard bond (making bonds with different remaining terms to be compared)

In practice, the reinvestment premise is largely classified as unrealistic, as the yield curve can change significantly over time.