# Rate of return

**returnreturnsreturn on investmentrates of returnROIannual returnpay for itselfRate of return on investmentreturns on investmentannualized return**

In finance, return is a profit on an investment.wikipedia

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### Investment

**Investmentsinvestingcapital investment**

In finance, return is a profit on an investment.

In finance, the benefit from an investment is called a return.

### Cash flow

**cash flowscashflowcash-flow**

It comprises any change in value of the investment, and/or cash flows which the investor receives from the investment, such as interest payments or dividends.

### Return on investment

**ROIreturnreturns**

The return on investment (ROI) is return per dollar invested.

ROI is often compared to expected (or required) rates of return on money invested.

### Net present value

**NPVdiscounted pricediscounted**

The internal rate of return (IRR) (which is a variety of money-weighted rate of return) is the rate of return which makes the net present value of cash flows zero.

This decrease in the current value of future cash flows is based on a chosen rate of return (or discount rate).

### Holding period return

The latter is also called the holding period return.

In finance, holding period return (HPR) is the return on an asset or portfolio over the whole period during which it was held.

### Time-weighted return

**true time weightedtrue time-weighted methodtrue time-weighted rate of return**

This is achieved using methods such as the time-weighted return.

where r is the continuous rate of return and t is the length of time.

### Volatility (finance)

**volatilityvolatileprice volatility**

The difference between the annualized return and average annual return increases with the variance of the returns – the more volatile the performance, the greater the difference.

In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns.

### Internal rate of return

**IRRannualized rate of returninternal rates of return**

The internal rate of return (IRR) is a measure of an investment’s rate of return.

### Interest

**simple interestrate of interestinterest rates**

It comprises any change in value of the investment, and/or cash flows which the investor receives from the investment, such as interest payments or dividends.

By applying an opportunity cost argument, comparing the loan rate with the rate of return on agricultural land, and a mathematical argument, applying the formula for the value of a perpetuity to a plantation, he argued that the land value would rise without limit, as the interest rate approached zero.

### Interest rate

**interest ratesdiscount rateinterest**

The time value of money is reflected in the interest rate that a bank offers for deposit accounts, and also in the interest rate that a bank charges for a loan such as a home mortgage.

Other interest rates apply over different periods, such as a month or a day, but they are usually annualised.

### Risk-free interest rate

**risk-free raterisk free raterisk-free asset**

The "risk-free" rate on US dollar investments is the rate on U.S. Treasury bills, because this is the highest rate available without risking capital.

The risk-free interest rate is the rate of return of a hypothetical investment with no risk of financial loss, over a given period of time.

### Time value of money

**Cumulative average returndiscounted future returnsearning potential of money over time**

Investments generate returns to the investor to compensate the investor for the time value of money.

Investors are willing to forgo spending their money now only if they expect a favorable return on their investment in the future, such that the increased value to be available later is sufficiently high to offset the preference to have money now; see required rate of return.

### Profit (accounting)

**profitprofitsprofitability**

In finance, return is a profit on an investment.

### Inequality of arithmetic and geometric means

**AM–GM inequalityarithmetic-geometric mean inequalityAM-GM inequality**

This is a consequence of the AM–GM inequality.

An important practical application in financial mathematics is to computing the rate of return: the annualized return, computed via the geometric mean, is less than the average annual return, computed by the arithmetic mean (or equal if all returns are equal).

### Compound interest

**continuous compoundingcompoundedcompounding**

Assuming returns are reinvested however, due to the effect of compounding, the relationship between a rate of return r, and a return R over a length of time t is:

For any continuously differentiable accumulation function a(t), the force of interest, or more generally the logarithmic or continuously compounded return is a function of time defined as follows:

### Foreign exchange risk

**currency riskexchange rate riskforeign exchange**

Financial risk is most commonly measured in terms of the variance or standard deviation of a quantity such as percentage returns or rates of change.

### Expected return

The expected rate of return is the expected return per currency unit (e.g., dollar) invested.

### Rate of profit

**profit rateprofit ratesrate of return**

It is similar to the concept of rate of return on investment.

### Yield (finance)

**yieldyields yield**

Normally, it does not include the price variations, distinguishing it from the total return.

### Modified Dietz method

The result of the calculation is expressed as a percentage return over the holding period.

### Compound annual growth rate

**CAGRgrowth rate% growth**

### Returns (economics)

**returnsreturneconomic returns**

### Finance

**financialfinancesfiscal**

In finance, return is a profit on an investment.

### Dividend

**dividendsstock dividendcash dividend**

It comprises any change in value of the investment, and/or cash flows which the investor receives from the investment, such as interest payments or dividends.