Average Rate of Return
Barron's Finance & Investment Dictionary:
Top
Average Rate of Return
1. Investments: arithmetic average of the annual returns of two or more investments.
2. Corporate finance: abbreviated ARR, ratio of the average cash inflow to the amount invested.
See also rate of return.
| Average Rate Option, Average Maturity | |
| Average Shares Outstanding, Average Up |
Barron's Real Estate Dictionary:
Top
Average Rate of Return
A measure of an investment’s profitability.
Total net earnings are divided by the number of years the investment was held, then by the investment’s initial acquisition cost , to derive the annual income rate. A drawback is that it does not consider the timing of earnings.
Example: An investment’s initial cost was $100. It paid a $2 annual dividend and was sold after five years for $150. The total return is $60 ($10 in dividends plus $50 in gain). The $60 earned over five years represents $12 per year, which is a 12% average rate of return.
Total net earnings are divided by the number of years the investment was held, then by the investment’s initial acquisition cost , to derive the annual income rate. A drawback is that it does not consider the timing of earnings.
Example: An investment’s initial cost was $100. It paid a $2 annual dividend and was sold after five years for $150. The total return is $60 ($10 in dividends plus $50 in gain). The $60 earned over five years represents $12 per year, which is a 12% average rate of return.
| Automated Valuation Model (AVM), Automated Mortgage Underwriting | |
| Avigation Easement, Avulsion |
Post a question - any question - to the WikiAnswers community:
Copyrights:
Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
Read more
Mentioned in
Simple Rate of Return
(in accounting)
The Standard Deviants: Finance, Part 3
(1997 Education Film)
» More