Let's say you buy a stock at $50, and after a year the stock is now worth $55. The RETURN for this stock is $5, since its value has increased by $5.

The RATE OF RETURN is simply this value expressed as a percentage and assigned a time frame.

In this example the rate of return would be 10% per year.

The rate of return is used to estimate the growth of an investment over a period of time.

Hi everyone,

I've been looking up some information on financial institutions, and I keep seeing the words, "rate of return". I have no idea what this means. I looked it up online but the definitions just use more financial words that I don't understand, haha. If someone can provide a definition and an explained example of rate of return using EVERYDAY terms, it will be very much appreciated.

Thanks!