Can anyone explain return on investment

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Narcissus

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Hi,

I asked this in askaboutbusiness already and some people had a stab at it, but nobody seems to know. Surely someone here knows.
Can anyone explain to me by way of example what ROI percentage actually means? It probably sounds silly but if i invest 10K and am promised a return on investment of 10% over 3 years, does that mean after year 1 i only get 1k back? Or does it mean i get my 10K plus 1K every year for 3 years? Please just for simplicity, can you base the answer around the same figures?
 
Is this return specific to some product that you are looking at investing in ? If so, can you provide a link?
 
surely it is just 1000 for the three years, not 1000 for every year????? The 10% is not an annual rate
 
From how you describe it, neither of your solutions is correct. It's most likely that you would invest 10k now and get 11k at the end of the three year period, (or the circa 1k interest might be paid in instalments over the three years, depending on the terms of the investment.)

So after year 1 you might get nothing back, or you might get €333 or a similar amount.

Your second scenario is certainly either too risky or too good to be true. Think about it. Your scenario of investing 10k up front and getting back 11k a year for three years means your 10k would yield a total of 23k (3 x 11k less your original 10k). That would be 230% over 3 years - a return of over 70% per annum.

It's unlikely that anyone would offer you this kind of return, as it would be far cheaper for them to just borrow the money from the bank. Unless it's so risky that the banks wouldn't touch the business, in which case you might consider doing likewise!
 
Thank you guys for the responses. I called my bank manager and she solved the enigma for me. It relates directly to savings account interest you accumilate which is in essence an investment. For example if i lodge 10K into a saving account and i am promised 10% over 3 years, this simply means that at the end of the 3 year term instead of 10k, i now have 11k. 1K is my ROI.... Of course no such savings incentive exists...

To F.Kruger,

It was an actual investment opportunity into a startup company but it was 30% over 3 years, i just wanted to keep it simple for arguments sake. They are high risk investments but some are certainly worth a punt! They can be found at www.ain.ie . You have to register as an investor to see the offers though, but its free to register.
 
Just to note Extopia was indeed correct so thanks to you!
CCOVICH! Thanks for the research tools, they are very helpful.
 
Narcissus said:
Hi,

Can anyone explain to me by way of example what ROI percentage actually means? It probably sounds silly but if i invest 10K and am promised a return on investment of 10% over 3 years, does that mean after year 1 i only get 1k back?
A return on investment of 10% over 3 years is actually a return of 3.22801 per annum. The value of the investment would be:-

10,000 initially
10,322.81 after 1 year
10,606.02 after 2 years
11,000 after 3 years
Click to expand...
Click to expand...
 
Narcissus said:
For example if i lodge 10K into a saving account and i am promised 10% over 3 years, this simply means that at the end of the 3 year term instead of 10k, i now have 11k. 1K is my ROI.... Of course no such savings incentive exists...
Click to expand...

Oh I don't know about that ..

Saving Bonds

Need a secure way to invest your money? Savings Bonds offer you a 10% tax-free, State Guaranteed return after a period of three years.
 
Narcissus

Please don't duplicate posts. Please read The Posting Guidelines before contributing further to Askaboutmoney.

Your question has been answered extensively in Askaboutbusiness.

Brendan
Administrator
 
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