rate of return

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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 ?
Since equation (1) holds for any positive integer n, Equation (3) must hold for any number of assets as well once the expected rate of return and their covariance existent or being given.
Remember: the required rate of return on an investment reflects the degree of risk of the investment.
Some investors are, in fact, willing to make investments at less than our willing investor criterion; that is, at some probability of achieving a greater than inflation rate of return less than 84% of the time.
Pre-tax profits as a rate of return on total sales among furniture manufacturers exceeded the same ratio among manufacturers in general in 1999, 2001 and 2002.
45% of the time, the stock's rate of return will be higher than the 7.
For the market-value measure, the average rate of return for USDIA was about 8 percent, compared with 3 percent for FDIUS.
This makes the taxable equivalent rate of return more attractive than the nominal annual percentage yield (APY) of the investment.
Use a special calculator or the standard Excel IRR function to take iterative guesses for internal rate of return until the equation results in zero (or close enough).
6 million in interest earnings, the city's rate of return stood at 6.
Thus the opportunity cost of the prepayment should be computed using the anticipated rate of return on taxable assets, which is, of course, almost invariably lower than the rate of return on sheltered assets (because of capital gains taxes).
10 /PRNewswire/ -- The Principal Financial Group, the nation's leading 401(k) provider by number of plans, has introduced Personalized Rate of Return, an online program giving plan participants a more comprehensive picture of their personal investment performance.