Accounting Rate of Return (or ARR, just like a pirate, matey) is the amount of profit (also known as return) you can expect to make on an investment.
You can use the ARR to compare investments and see which one will make you the most moolah over time. ARR is pretty basic, and it does not take inflation into consideration, so it's up to you to keep in mind that, if you're making $100 a year from an investment, the $100 you earn this year is going to be worth a lot more than the $100 you earn on that same investment ten years from now.
Related or Semi-related Video
Finance: What Is a Real Return?67 Views
finance- a la shmoop. what is a real return? like is there a fake return? you
know like the news? well kinda .real return refers to an [man frowns talking to camera]
investment return mapped against inflation. so let's say you invest in a
bond that pays five percent a year for ten years and then pays you back your
principal .boring but nice- you know like a good doctor visit. your nominal return
over that period was 5% but since inflation was 3% a year during that
period on average your real return was only 2% a year- meaning that the
performance of your investment only eked out a 2% net gain against the price of [equation]
milk gas and you know knocked off iPhones. so don't be a chump who thinks
that they're making more money than they really are, and you know keep on keeping
it real. [man sitting in chair, talks to camera]
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