Site Search
Main Finance Terms total return

total return



annual return on an investment including appreciation, dividends, or interest, and other distributions. For bonds held to maturity, total return isYield To Maturity. For stocks, future appreciation is projected using the currentPrice/Earnings Ratio. In options trading, total return means dividends plus capital gains plus premium income.


Dictionary of Banking Terms
total return

annual return on an investment including interest on dividend payments and price appreciation (capital gains). Total return is usually expressed as a percentage. For corporate bonds, total return is the equivalent of theyield to maturitycalculation- for stocks, future capital appreciation is projected using the currentprice/earnings ratio. Mutual funds use a formula worked out by the Securities and Exchange Commission in advertising fund performance.

In mortgage-backed securities and asset-backed securities, total return differs from the yield to maturity calculation because the total return calculation takes into account reinvestment income and borrower prepayments. When interest rates are falling, borrowers tend to prepay their mortgages and refinance their loans at current interest rates, causing investor yields on conventional mortgage-backed securities to drop.

See alsocash flowyield
Dictionary of Insurance Terms
total return

comprehensive gain or loss on a security over a stipulated period of time comprised of capital appreciation plus dividend/ interest received.


Related Terms:
Dictionary of Banking Terms
cash flowyield

monthly rate of return of a mortgage-backed security, based on principal and interest mortgage payments and an estimated rate of loan prepayment. Cash flow yield is the monthly Internal Rate of Return (IRR)of a mortgage-backed security, assuming a standard rate of mortgage prepayments. The cash flows from mortgages are discounted to their net present value, producing the rate of return that approximates the actual return to the holder. Prepayment assumptions are adjusted according to differing types of collateral, for example, Federal Housing Authority insured loans or conventional mortgages. Because some mortgage pools are paid off faster than others, cash flow yield offers a more realistic way to price mortgage backed securities than the 12-year prepayment assumptions prevalent in the 1970s.


Referring Terms:
rate of return
all-in cost


Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.Copyright c 2006, 2000, 1997, 1993, 1990 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.Copyright © 2000, 1995, 1991, 1987 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.

total return