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 the yield to maturitycalculation; for stocks, future capital appreciation is projected using the current price/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.
annual return on an investment including appreciation, dividends, or interest, and other distributions. For bonds held to maturity, total return is Yield To Maturity. For stocks, future appreciation is projected using the current Price/Earnings Ratio. In options trading, total return means dividends plus capital gains plus premium income.
comprehensive gain or loss on a security over a stipulated period of time comprised of capital appreciation plus dividend/ interest received.
