Rate of return: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson (Add example.) |
(Classify page.) |
||
(14 intermediate revisions by 2 users not shown) | |||
Line 1: | Line 1: | ||
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. | ||
Line 11: | Line 11: | ||
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 | ||
= (1.03 / 1.00) - 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 proposed deal is being negotiated. | |||
== See also == | == See also == | ||
* [[Conventional year]] | |||
* [[Cost of capital]] | |||
* [[Discount rate]] | |||
* [[Effective annual rate]] | |||
* [[Expected rate of return]] | |||
* [[Nominal annual rate]] | |||
* [[Periodic]] | |||
* [[Periodic rate]] | * [[Periodic rate]] | ||
* [[Real return]] | * [[Real return]] | ||
* [[Return]] | * [[Return]] | ||
* [[Risk]] | |||
* [[Yield]] | * [[Yield]] | ||
[[Category: | [[Category:Accounting,_tax_and_regulation]] | ||
[[Category:The_business_context]] |
Latest revision as of 02:21, 6 January 2024
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
= (1.03 / 1.00) - 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 proposed deal is being negotiated.