# 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 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 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.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

## rate of return

The 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.
References in periodicals archive ?
Should this be the case, market equilibrium is irrelevant to CAPM, and the required rate of return on an asset based on the market equilibrium in CAPM must equal the assumed expected rate of return on an asset in Equation (1).
For both methods, the rate of return to capital is determined endogenously.
Remember: the required rate of return on an investment reflects the degree of risk of the investment.
The remainder of this paper is organized as follows: (1) the characteristics of the rate of return and the volatility of return; (2) correlation coefficients; (3) regressions of the rate of return; (4) regressions of the volatility of return; and (5) conclusions.
Table 4 shows the rate of return over time of faculty members in the public and private sectors.
Minimum acceptable rate of return can be used an input for calculating residuals.
The main problem when trying to establish the long term relationship between accounting rates of return (ARRs) and the internal rate of return (IRR) is arriving at the correct IRR to compare to the ARRs.
Investors are willing to accept a lower rate of return on their money.
The rate of return represents, in a percentage, the amount of net annual income compared to the price.
The approach results in a single number that can be interpreted as an interest rate: the higher the interest rate, the higher the rate of return and the better the investment.
Calculus is still behind the scenes, but with functions such as Excel's XIRR, most users can solve investment rate of return problems without worrying about calculus.

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