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

= (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

• Conventional year
• Cost of capital
• Discount rate
• Effective annual rate
• Expected rate of return
• Nominal annual rate
• Periodic
• Periodic rate
• Real return
• Return
• Risk
• Yield