rate of return

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Related to Average Annual Rate of Return: Arithmetic Average Rate of Return

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 ?
With stocks, however, that dollar could have soared to $1,406 over 71 years by having an average annual rate of return (ROR) of 12.82 percent.
The market-neutral fund seeks an average annual rate of return equal to the Treasury-bill yield plus 5 percent, net of all fees and with no negative years.
Donoghue said the county system has seen an average annual rate of return of 9.7 percent since the mid-1980s.
The club's portfolio soared in 1995 and 1996, posting an average annual rate of return of 32.2% and 52.7%, respectively.
If a $50 stock investment has a total return of 10% the first year and 20% the second, its average annual rate of return is 15%.

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