Rate of Return
, the amount of revenue
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
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rate of return
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson
rate of returnThe ratio between the earnings and the cost of an investment.
The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.