What is the required return rate?

also known magic number, obstacle rate or RRR, the required return rate is the amount of earnings or return that the investor must realize to invest his resources in the security, joint business or other type of money to make money. The expected return, usually expressed in percent, is often calculated annually, although some investors can use a quarterly or even monthly percentage to evaluate the activity of activity. Responsibility for the investor's belief that the opportunity will bring the required return rate is usually based on the issuer of security or business opportunities.

There is no accurate formula to determine what all investors would consider to be a minimum or required return level. In fact, this process can be very subjective. Factors such as the amount of investment, the investor's ability to hold the investment long enough to gain return, and personal funding of the investor's goal are often the sameThe shading of the settlement process is considered to be a minimum return requirement. This means that if the estimated return rate is 5%, one investor may feel that this is a reasonable return level, while another investor would consider earnings this percentage for insufficient.

When evaluating any investment, it is important to look at whether the generated return will actually be acceptable. Often this involves comparing the anticipated or expected return to other investment options. For example, an investor may not be noted that two stock options currently sold at the same market price offer similar payback rates, with the expected return is 10% and another 9%. Suppose the level of risk involved is the same with both options, it is likely that the investor will go with shares that are expected to produce 10% return.

while Je This calculation of the expected return very important, investors are also considering other factors in determining the required return rate. The level of risk is one of the examples. If the shares that are expected to earn 10% annual yield is also considered to be a more volatile option, the conservative investor may decide to go with other shares that offer a slightly lower percentage of return, but is also significantly less volatile. The general investment strategy of an individual investor will always affect what he perceives as the required return level.