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 periodic rate of return (r) is:
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
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= <math>\frac{1.03}{1}</math> - 1
= <math>\frac{1.03}{1}</math> - 1


= 0.03
= 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.


= '''3%'''
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.


See also