Yearly Rate Of Return Method

DEFINITION of 'Yearly Rate Of Return Method '

More commonly referred to as annual percentage rate. It is the interest rate earned on a fund throughout an entire year. The yearly rate of return is calculated by taking the amount of money gained or lost at the end of the year and dividing it by the initial investment at the beginning of the year. This method is also referred to as the annual rate of return or the nominal annual rate.


BREAKING DOWN 'Yearly Rate Of Return Method '

Calculated by:


Yearly Rate of Return = End of the year value - beginning of the year value
beginning of the year value



The yearly rate of return method give the owners an idea of how their investment in the company is doing year over year.

RELATED TERMS
  1. Accounting Rate of Return - ARR

    The amount of profit, or return, that an individual can expect ...
  2. Return

    The gain or loss of a security in a particular period. The return ...
  3. Annualize

    1. To convert a rate of any length into a rate that reflects ...
  4. Real Rate Of Return

    The annual percentage return realized on an investment, which ...
  5. Compound Return

    The rate of return, usually expressed as a percentage, that represents ...
  6. Annualized Rate

    A rate of return for a given period that is less than one year, ...
Related Articles
  1. Markets

    What's a Real Rate of Return?

    A real rate of return is an annual percentage investment return that’s adjusted for inflation, taxes or other factors.
  2. Managing Wealth

    How To Measure Returns On The Series 65 Exam

    An investor who is evaluating the performance of a portfolio manager must take into consideration the impact that any contributions or withdrawals made by the investor will have on the overall ...
  3. Markets

    Explaining Growth Rates

    Growth rate refers to the amount a specific variable or measure has grown over a specified time, whether related to one company or an entire economy.
  4. Investing

    How To Calculate Your Investment Return

    How much are your investments actually returning? Find out why the method of calculation matters.
  5. Investing

    Calculating Annualized Total Return

    The annualized total return is the average return of an investment each year over a given time period.
  6. ETFs & Mutual Funds

    Explaining Annual Returns

    Annual return is the standard percentage rate for most investments and credit facilities.
  7. Markets

    What's the Rate of Return?

    Rate of return is the earnings an asset generates in excess of its initial cost. The amount is usually expressed as an annualized percentage rate. Rate of return can be calculated based on the ...
  8. Investing

    What Is Year Over Year?

    Year over year measures performance in one time period versus performance in a previous time period.
  9. Markets

    Understanding Interest Rates: Nominal, Real And Effective

    Interest rates can be broken down into several subcategories that incorporate various factors such as inflation. Smart investors know to look beyond the nominal or coupon rate of a bond or loan ...
  10. Investing

    Calculating The Gain Or Loss On An Investment

    Calculating the percentage of change in an investment is easy. Take the amount the investment gains and divide it by the amount invested.
RELATED FAQS
  1. What is the difference between a company's annual return and its annualized return?

    Understand the importance of calculating a company's annual return and its annualized return, and learn the differences between ... Read Answer >>
  2. What can cause the rate of return to be negative?

    Learn how poor company or sector performance, economic turmoil and inflation can cause the rate of return on an investment ... Read Answer >>
  3. How do I calculate my portfolio's investment returns and performance?

    Learn the basic principles underlying the data and calculations used to perform personal rates of return on investment portfolios. Read Answer >>
  4. What is the difference between yield and rate of return?

    Read about the differences between yield and rate of return. See why many novice investors often struggle more with the concept ... Read Answer >>
  5. How is the expected market return determined when calculating market risk premium?

    Find out how the expected market return rate is determined when calculating market risk premium and how these figures are ... Read Answer >>
  6. How far above the hurdle rate makes for a good investment?

    Find out how the hurdle rate is related to the internal rate of return. Learn how the two factors assist financial leaders ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center