Required Rate of Return

(redirected from Required Returns)

Required Rate of Return (RRR)

The minimum expected yield by investors require in order to select a particular investment.

Required Rate of Return

In securities, the minimum acceptable rate of return at a given level of risk. Different investors have different reasons for choosing their required returns. Normally, it is determined by a person's or institution's cost of capital. For example, an investor may also carry a debt with a high interest rate; if an investment does not meet a required rate of return, it would make more sense for the investor to pay down his/her debt. The required return is also related to the amount of risk an investor is willing to accept. One with a portfolio consisting largely of bonds will generally have a lower required return than one whose portfolio contains mainly stocks. See also: Markowitz Portfolio Theory.

required rate of return

1. The minimum rate of return that an investment must provide or must be expected to provide in order to justify its acquisition. For example, an investor who can earn an annual return of 11% on certificates of deposit may set a required rate of return of 15% on a more risky stock investment before considering a shift of funds into stock. An investment's required return is a function of the returns available on other investments and of the risk level inherent in a particular investment.
2. The minimum rate of return required by an investor, a stipulation that limits the types of investments the investor can undertake. For example, a person with a required rate of return of 15% would generally have to invest in relatively risky securities.
References in periodicals archive ?
Sean Kidney, CEO of the Climate Bonds Initiative said: "Addressing the risk of catastrophic climate change requires commitment; Barclays have shown that commitment can be combined with investing that achieves required returns at the same time.
Before the collection issues can be resolved, all required returns must be filed.
For example, if investor-required returns decreased from 40% in 2010 (the last number in the first column) to a 10% required return in 2014 (the first number in the top row), the increase in portfolio value would be approximately $439,323,661.
In addition, a reduction in the property risk premium, to the lowest level since before the financial crises, has reduced investors' required returns.
However, the 2013 music events failed to generate the required returns we had hoped for and we have therefore revised our strategy to focus on acts that will offer greater prospects for profitability.
Richard Yorke, head of UK research, comments: "The rapid fall in the UK Fair Value Index will be due to a combination of yield compression, lower expected returns as regional markets become less under-valued, and higher required returns caused by rising bond yields.
To meet the filing compliance requirement, the taxpayer must have filed, or filed a valid extension for, all currently required returns and not have an outstanding request from the IRS for an unfiled return.
UGB 's results show the strength of our asset base which continues to deliver the required returns.
Most US markets were cold, offering expected returns below risk adjusted required returns," said Nigel Almond, associate director of forecasting & strategy at DTZ and author of the report.
Failure to file the required returns by October 15, 2010, will result in revocation of tax-exempt status.
She concludes that the required returns on stock options based on the CAPM for a well-diversified investor and the required returns for fully or partly undiversified executives, based on the Sharpe ratio, differ substantially.
Our peer-reviewed technical articles this month look at issues such as assessing required returns for investing in timberland, life-cycle assessment of windows, manufacturing and using OSB, and control of insects and fungi.

Full browser ?