Annual rate of return

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Related to Annual rate of return: Average Annual Rate of Return

Annual rate of return

There are many ways of calculating the annual rate of return. If the rate of return is calculated on a monthly basis, we sometimes multiply this by 12 to express an annual rate of return. This is often called the annual percentage rate (APR). The annual percentage yield (APY) includes the effect of compounding interest.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Annual Percentage Rate

The cost of funds or interest rate for an entire year expressed as a single percentage. Significantly, the APR does not account for compounding. For example, if the APR is 36%, the percentage is 3% per month, but the interest rate or cost of funds for the entire year may be greater than 36% due to the effects of compounding. By law, a credit card company or other lender must inform the customer of the APR before any agreement is signed. The APR provides the customer with a convenient number against which to compare the cost of funds for other loans or investments. It is less commonly called the annual rate of return or the nominal annual rate.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
The latter were the only fund of this group to record a positive average annual rate of return and the lowest level of risk at the same time.
She used the guaranteed annual rate of return of 8% for 15 years, included the guaranteed first year 10% bonus (if they acted promptly while it was still being offered), and the guaranteed 5% pay-out rate over 20 years.
government bonds, would have done better, with an ending 2006 value of $18,235 and an annual rate of return of 4.90%.
The median annual rate of return for defined-benefit plans averaged 10.13 percent compared with 9.06 percent for 401(k) plans from 1995 through 2007, according to consulting firm Towers Watson.
"Alicia Munnell, director of the Center for Retirement Research at Boston College, says the cost of a meaningful guarantee--one promising an annual rate of return of, say, 4 percent to 6 percent--would be prohibitive for the private sector and would bump into limits on insurers' capacity for transferring risk to other players through their hedges.
The band established a trust fund and in the first fiscal year, the annual rate of return on the trust fund was almost 12.9 per cent, earning $41.2 million in 2006.
In the above example (increasing the annual rate of return from 6 percent to 10 percent) a plan participant's total retirement income payout over 15 years could increase by 51 percent.
"Between 2004-2008, the average annual rate of return for these investments was between 40-50 percent, so these plans are quite effective when held over a long period," said Soliman.Aa
At an annual rate of return on the pension capital of 3% and a discount rate of 3%, the tax actually paid--in terms of net present value and measured over a period of 15 years--is 3.8 billion euros, compared to 9.2 euros in the benchmark case.
The nominal annual rate of return on Mary's portfolio is 9% and the annual inflation rate is 4%.
Still, the investment team will have to achieve an estimated 9.6 percent annual rate of return to meet the requirement.
This equates to a total annual rate of return of 8.8%, compared to an annual rate of nearer to 30% in the June quarter last year.

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