Rate of return: Difference between revisions
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The rate of return in the example above has been calculated and stated on a [[periodic]] basis. | 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 | Rates of return are often also quoted on an annual basis, following the quoting convention for the market in which the proposed deal is being quoted. | ||
Revision as of 17:06, 19 November 2015
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 quoting convention for the market in which the proposed deal is being quoted.
