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An annual rate of return is a return over a period of one year, such as January 1 through December 31, or June 3, 2006, through June 2, 2007, whereas an annualized rate of return is a rate of return per year, measured over a period either longer or shorter than one year, such as a month, or two years, annualized for comparison with a one-year ...
A reasonably accurate equation for the percent Total Return in a year of any security is the sum of the percent gain (or loss, a negative percent) over the year in the security value, plus the annual dividend yield expressed as a percent (100 × annual dividends divided by the security price at the beginning of the year).
This contrasts with the total return, which does take into account the income generated in the portfolio. Often, when the return of a stock market index is quoted in the press, the quoted returns concern price returns, rather than the total returns. Examples are the S&P 500 and the MSCI EAFE, which are typically quoted in terms of price return. [1]
Return on investment may be extended to terms other than financial gain. For example, social return on investment (SROI) is a principles-based method for measuring extra-financial value (i.e., environmental and social value not currently reflected in conventional financial accounts) relative to resources invested.
In Classical Economics profit is the return to the proprietor(s) of capital stocks (machinery, tools, structures). If I lease a backhoe from a tool rental company the amount I pay to the backhoe owner it is seen by me as "rent". But that same flow as seen by the supplier of the backhoe is "interest" (i.e. the return to loaned stock/money).
The first quarter holding period return is: ($98 – $100 + $1) / $100 = -1% Since the final stock price at the end of the year is $99, the annual holding period return is: ($99 ending price - $100 beginning price + $4 dividends) / $100 beginning price = 3% If the final stock price had been $95, the annual HPR would be:
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The accounting rate of return, also known as average rate of return, or ARR, is a financial ratio used in capital budgeting. [1] The ratio does not take into account the concept of time value of money. ARR calculates the return, generated from net income of the proposed capital investment. The ARR is a percentage return.