Required Rate of Return

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Required Rate of Return (RRR)

The minimum expected yield by investors require in order to select a particular investment.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
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.
References in periodicals archive ?
*Ensure RRR children start school with a strong foundation for learning.
The SOC content in the top 10cm in RRR was significantly greater than in the top horizon of RUR, RUU and UUU (33 vs 26, 24 and 18g [kg.sup.-1] respectively; P<0.05).
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Consequently, more RRR cuts are expected over the coming months so that the People's Bank of China can hit credit growth targets.
Included in the book are black line masters of checklists for observing reading behaviour and awareness, RRR recording sheets.
Three quantities that are common variables in RRR measurements of superconductors are temperature, magnetic field, and angle of the magnetic field.
And, while inflation is a concern - having risen to 4.4 percent year on year in October, from 3.6 pecent in September - this cannot explain why the PBC raised the RRR three times earlier this year, when inflation was lower.
This is the fourth RRR rise that the central bank has ordered for Chinese banks this year.
The UK currently uses FAUN's RRR system to bring airfields damaged by conflict back into use.
Although RRR and ZRP [6] are both hybrid algorithms that use routing zones, there are fundamental differences.
Measured under US Securities Exchange Commission rules, Shell's Reserves Replacement Rate (RRR), the rate at which production is matched with finds, was only 17 per cent, down from 158 in 2006.
Despite the widespread use of relative risk reduction (RRR) values to describe the benefits of osteoporosis therapy, health literacy experts favor focusing on absolute risk reduction (ARR).