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 ?
Clive Lloyd, deputy leader of Swansea Council and chair of the scheme's pension fund committee, said: "Like many other pension funds, we think carefully about how the investments we manage for thousands of existing contributors and pensioners are able to maximise the required returns, whilst also being mindful of our responsibilities to the environment and future generations.
For this reason, required returns on capital investment in the region of 15% is not unreasonable.
The potential alpha stocks are those blue chips with relatively lower required returns based on prevailing opportunity costs.
Retailers can use software or services to help them collect tax, submit it to state tax authorities and compile required returns. The software is likely compatible with a retailer's e-commerce system.
Individuals seeking a long-term payment plan who owe $50,000 or less in combined tax, penalties, and interest, and have filed all required returns, and individuals seeking a short-term payment plan who owe less than $100,000 in combined tax, penalties, and interest are generally eligible.
They may also be removed for failure to lodge any required returns of election expenses within the required time, if they are sentenced to no less than a year's imprisonment or fined no less than RM2,000, if they hold the citizenship of another country, or pledge allegiance to one.
Prosecutors said the star dodged taxes by living virtually on cash, without maintaining a bank account or filing required returns to the IRS, failing to pay $1.7 million in tax liabilities between 2002 and 2005.
"With a lower outlook for beta returns across most asset classes, alpha becomes an even more critical component for achieving required returns." Active managers can opportunistically shift assets across sectors, asset classes and regions, and can tactically "position portfolios through late-cycle challenges" and help diversify portfolio risk, according to the return.
Prior law required returns to be filed the 15th of the fourth month following the close of the taxable year.
To use the tool, an individual taxpayer must owe $50,000 or less in combined tax, interest, and penalties, and all required returns must be filed.
Nevertheless, the required returns will, like any other investment, be a function of the perceived investment risk; the greater the risk, the higher the targeted IRR.