What Is a Required Rate of Return?

The required rate of return is the minimum expected rate of return required by an investor to invest in an asset after considering the risk of the asset. It represents the opportunity cost of an asset investment, which is the highest level of expected return that can be obtained by investing in a similar level of risk elsewhere. As the opportunity cost of asset investment, the required rate of return represents a value threshold for reasonable compensation for asset risk.

Required return

Right!

The required rate of return is the minimum expected rate of return required by an investor to invest in an asset after considering the risk of the asset. It represents the opportunity cost of an asset investment, which is the highest level of expected return that can be obtained by investing in a similar level of risk elsewhere. As the opportunity cost of asset investment, the required rate of return represents a value threshold for reasonable compensation for asset risk.

Chinese name

Required return

Foreign name

required rate of return

Short name

Demand return

nickname

required return

basic concept

The required return rate [required rate, or simply required return] is the minimum expected rate of return required by an investor to invest in an asset over a period of time after considering the risk of the asset. It represents the opportunity cost of an asset investment, which is the highest level of expected return that can be obtained by investing in a similar level of risk elsewhere.

As the opportunity cost of asset investment, the required rate of return represents a value threshold for reasonable compensation for asset risk. If the investor's expected return is higher than the required return, the asset will appear to be undervalued because its expected return exceeds the requirement to compensate for the risk of the asset. Conversely, if the expected return on an asset is lower than the required return, the asset will appear to be overvalued.