rate of return

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Rate of return

Calculated as the (value now minus value at time of purchase) divided by value at time of purchase. For equities, we often include dividends with the value now. See also: Return, annual rate of return.

Rate of Return

In securities, the amount of revenue an investment generates over a given period of time as a percentage of the amount of capital invested. The rate of return shows the amount of time it will take to recover one's investment. For example, if one invests $1,000 and receives $150 in the first year of the investment, the rate of return is 15%, and the investor will recover his/her initial $1,000 in six years and eight months. Different investors have different required rates of return at different levels of risk.

rate of return

Rate of return.

Rate of return is income you collect on an investment expressed as a percentage of the investment's purchase price. With a common stock, the rate of return is dividend yield, or your annual dividend divided by the price you paid for the stock.

However, the term is also used to mean percentage return, which is a stock's total return -- dividend plus change in value -- divided by the investment amount.

With a bond, rate of return is the current yield, or your annual interest income divided by the price you paid for the bond. For example, if you paid $900 for a bond with a par value of $1,000 that pays 6% interest, your rate of return is $60 divided by $900, or 6.67%.

rate of return

the PROFITS earned by a business, measured as a percentage of the ASSETS employed in the business. See RETURN ON CAPITAL EMPLOYED.

rate of return

the PROFITS earned by a business, measured as a percentage of the ASSETS employed in the business. See NORMAL PROFIT, ABOVE-NORMAL PROFIT, RATE OF RETURN REGULATION, RETURN ON CAPITAL EMPLOYED.

rate of return

The ratio between the earnings and the cost of an investment.
References in periodicals archive ?
Equation (5) shows the market risk premium as computed by ex-ante population parameters; the expected rates of return and the covariances among the stochastic rate of returns.
For MRSK regional branches that switched to RAB from 2009 and 2010 as well as for FSK, the previously established regulatory rates of return for the first three years of RAB implementation, are due to remain unchanged.
If this is indeed the case, then the net increment to the government of investing the trust fund in equities on an ongoing basis presumably would be less than the historical rates of return suggest.
Specifically, the rate of inflation is not a constant and, although included in the rates of return for each investment category in the Barron's data, the rate of return for an investment traditionally lags behind changes in the rate of inflation.
Table 1 shows rates of return for USDIA and FDIUS based on market value and on current cost compared with a market rate of return for all U.
Except for the 1933-36 period, the Falmouth had similar rates of return even though the interval between sales varied significantly: Seventy-four, six and forty-six years for the first, second, and fourth transactions, respectively.
The derived rate of return provides a measure that can be compared to rates of return on other financial instruments.
An alternate stochastic financial result is the distribution of potential annual rates of return given a fixed settlement price.
Some 78 percent of the companies lowered their expected rates of return in 2003, with the median expected rate of return at 8.
This imbalance can only be redressed by lifting the rates of return on capital in Europe and Japan and in no other way.
Proper tax planning gives individual investors the opportunity to increase their rates of return without increasing risk.