The rate of return may be expressed as a negative number if the investment **decreases** in value.

This means that if the initial value of an investment is higher than the final value, it results in a loss, which reflects as a negative return. For example, if you invest $100 and it drops to $80, the rate of return would be calculated as:

$$
\text{Rate of Return} = \frac{\text{Final Value} - \text{Initial Value}}{\text{Initial Value}} = \frac{80 - 100}{100} = -0.2 \text{ or } -20\%
$$

In this case, the negative 20% signifies a loss on the investment.

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The rate of return may be expressed as a negative number if the investment **decreases** in value.

This means that if the initial value of an investment is higher than the final value, it results in a loss, which reflects as a negative return. For example, if you invest $100 and it drops to $80, the rate of return would be calculated as:

$$
\text{Rate of Return} = \frac{\text{Final Value} - \text{Initial Value}}{\text{Initial Value}} = \frac{80 - 100}{100} = -0.2 \text{ or } -20\%
$$

In this case, the negative 20% signifies a loss on the investment.

Knowee AI · Accepted Answer

The rate of return may be expressed as a negative number if the investment **decreases** in value.

This means that if the initial value of an investment is higher than the final value, it results in a loss, which reflects as a negative return. For example, if you invest $100 and it drops to $80, the rate of return would be calculated as:

$$
\text{Rate of Return} = \frac{\text{Final Value} - \text{Initial Value}}{\text{Initial Value}} = \frac{80 - 100}{100} = -0.2 \text{ or } -20\%
$$

In this case, the negative 20% signifies a loss on the investment.

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