- What is rate of return? | Rate of return definition
- If you also consider the effect of the time value of money and inflation, the real rate of return can also be defined as the net amount of discounted cash flows DCF received on an investment after adjusting for inflation.
Rate of return definition What is rate of return? Rate of return ROR is the loss or gain of an investment over a certain period, expressed as a percentage of the initial cost of the investment. You will have a rate of return on any investment you make.
To calculate the rate of return for an investment, subtract the starting value of the investment from its final value remember to include dividends and interest.
Then, divide this amount by the starting value of the investment, and multiply that figure by This will give you the RoR, expressed as a percentage. Learn how to trade shares Discover how to start trading shares in four steps.
What is rate of return?
Learn more Rate of return in trading and investing A rate of return can give traders and investors key information for future trades or investments.
The rate of return can be used by traders to evaluate the outcome of their trades.
However, it is more commonly used as a long-term calculation by investors — to determine whether the cost of an investment is worth the potential profit or loss.
Shares vs bonds rates of return The calculations for the rate of return for shares and the rate of return for bonds are different because shares yield dividends, while bonds carry interest.
To get your rate of return as a percentage, you would multiply this figure by The calculation of the rate of return is the interest plus appreciation, divided by original bond price — expressed as a percentage. Build your trading knowledge.