Real Rate Of Return
How to Calculate the Real Rate of Return on Your Investment The real rate of return helps investors determine which investment offers a higher return without taking into account the impact of taxes or investment fees. By subtracting the nominal interest rate from the inflation rate, the real rate of return is a useful tool that can help you decide...
Random Variable
What is a 'Random Variable' A random variable is a variable whose value is unknown or a function that assigns values to each of an experiment's outcomes. Random variables are often designated by letters and can be classified as discrete, which are variables that have specific values, or continuous, which are variables that can have any values...
Rate Of Return
What is a 'Rate Of Return' A rate of return is the gain or loss on an investment over a specified time period, expressed as a percentage of the investment’s cost. Gains on investments are defined as income received plus any capital gains realized on the sale of the investment. Rate of return can also be defined as the net...
Rational Pricing
Definition Rational pricing is the assumption in financial economics that asset prices will reflect the arbitrage-free price of the asset as any deviation from this price will be "arbitraged away". This assumption is useful in pricing fixed income securities, particularly bonds, and is fundamental to the pricing of derivative instruments. What is 'Rational Pricing' A financial theory that contends that the market...
Rate Of Change
What is 'Rate Of Change' The rate of change (ROC) is the speed at which a variable changes over a specific period of time. ROC is often used when speaking about momentum, and it can generally be expressed as a ratio between a change in one variable relative to a corresponding change in another; graphically, the rate...
Re-Offer Price
What is ‘Re-Offer Price' The term "re-offer price" refers to the price at which a financial institution offers a security that it has previously purchased. Re-offer price differs from the original purchase offer price, as it takes into account any accrued interest or changes in market value. When determining the re-offer price, financial institutions consider a variety of factors including current...
Rationing
What is rationing and why was it used during World War II Rationing is a system of limiting the availability of goods or services to a particular group of people. Rationing is often used during times of war or other national emergencies, when resources are limited and need to be conserved. Rationing was first used during World War I, and...
Rationalization
What is 'Rationalization' Rationalization is a reorganization of a company in order to increase its efficiency. This reorganization may lead to an expansion or reduction in company size, a change of policy, or an alteration of strategy pertaining to particular products. Similar to a reorganization, a rationalization is more widespread, encompassing strategy as well as structural changes. How to know if...
Ratings Service
What is 'Ratings Service' A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. Explaining 'Ratings Service' Ratings range from AAA or Aaa (the highest) to C or D, which represents a company that has already defaulted. ...
Ratio Analysis
What is 'Ratio Analysis' A ratio analysis is a quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items in financial statements like the balance sheet, income statement and cash flow statement; the ratios of one item – or a combination of items - to another item or combination are...