Rate of return: Difference between revisions
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The investor's return on an investment expressed as a proportion of the amount invested. | The investor's return on an investment, expressed as a proportion of the amount invested. | ||
Most commonly expressed as a percentage. | Most commonly expressed as a percentage. | ||
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The | The rate of return per period (r) is: | ||
r = (End amount / Start amount) - 1 | r = (End amount / Start amount) - 1 | ||
Which can also be expressed as: | |||
''Which can also be expressed as:'' | |||
r = (End / Start) - 1 | r = (End / Start) - 1 | ||
Line 26: | Line 27: | ||
= <math>\frac{1.03}{1}</math> - 1 | = <math>\frac{1.03}{1}</math> - 1 | ||
= 0. | = 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 convention for the market in which the deal is being negotiated. | |||
== See also == | == See also == | ||
* [[Conventional year]] | |||
* [[Effective annual rate]] | |||
* [[Nominal annual rate]] | |||
* [[Periodic]] | |||
* [[Periodic rate]] | * [[Periodic rate]] | ||
* [[Real return]] | * [[Real return]] |
Revision as of 17:07, 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 convention for the market in which the deal is being negotiated.