Definition

Noun The percentage of profit or loss generated on an investment over a specified period, relative to the initial cost of the investment.

Usage

"Rate of return" is used to measure and compare the efficiency or profitability of different investments. It is a key metric in finance and investment analysis.

Examples

• Noun:
  • The stock had an average annual rate of return of 8% over the past decade.
  • Investors are seeking a higher rate of return to compensate for the increased risk.
  • Calculating the internal rate of return helps in evaluating the viability of a project.

Advanced Usage

• "to achieve a rate of return": to attain a specific level of profitability from an investment.
  • The fund aims to achieve a rate of return that exceeds the market average.
• "rate of return analysis": the process of evaluating the profitability of an investment using this metric.
  • A thorough rate of return analysis is essential before committing capital.

Variants and Related Words

• Return on Investment (ROI) (n): A closely related financial ratio measuring the gain or loss generated relative to the amount invested.
  • The ROI on the marketing campaign was very positive.
• Internal Rate of Return (IRR) (n): A specific metric used in capital budgeting to estimate the profitability of potential investments.
  • The project was approved because its IRR was higher than the company's required rate.
• Annualized Rate of Return (n): The geometric average amount of money earned by an investment each year over a given time period.
  • The annualized rate of return smooths out performance over multiple years.

Synonyms

• Yield: The income return on an investment, such as interest or dividends received.
• Profitability: The degree to which a business or investment yields profit or financial gain.

Related Phrases

• "required rate of return": the minimum acceptable return on an investment given its risk level.
  • The project did not meet the company's required rate of return.
• "real rate of return": the annual percentage return realized on an investment, adjusted for changes in prices (inflation).
  • After inflation, the real rate of return was only 2%.

Noun

1. the amount returned per unit of time expressed as a percentage of the cost