required rate of return

1. The minimum rate of return that an investment must provide, or must be expected to provide, in order to justify its acquisition. For example, an investor who can earn an annual return of 5% on certificates of deposit may set a required rate of return of 9% on a more risky stock investment before considering a shift of funds into the stock. An investment's required rate of return is a function of the returns available on other investments and the risk level inherent in a particular investment.
2. The minimum rate of return required by an investor, a stipulation that limits the types of investments the investor can undertake. For example, a person with a required rate of return of 14% would generally have to invest in relatively risky securities.