Rate of return

The investor's return on an investment, expressed as a proportion of the amount invested.

Most commonly expressed as a percentage.

Example

GBP 1 million is invested.

GBP 1.03 million is repayable at the end of the period.

The rate of return per period (r) is:

r = (End amount / Start amount) - 1

Which can also be expressed as:

r = (End / Start) - 1

or

r = <math>\frac{End}{Start}</math> - 1

= <math>\frac{1.03}{1}</math> - 1

= 0.0300

= 3.00% per period

Basis of quoting rates of return

The rate of return in the example above has been calculated and stated on a periodic basis.

Rates of return are often also quoted on an annual basis, following the conventional quoting convention for the market in which the proposed deal is being quoted.

See also

• Conventional year
• Effective annual rate
• Nominal annual rate
• Periodic
• Periodic rate
• Real return
• Return
• Yield