What term describes the rate that reflects the return on investment?

The term that describes the rate reflecting the return on investment is known as the discount rate. This rate is fundamentally important when evaluating investment opportunities, as it represents the opportunity cost of capital and is used to determine the present value of future cash flows.

In financial analysis, the discount rate helps to assess the attractiveness of an investment by factoring in the risk and time value of money. When future cash flows are discounted at this rate, investors can gauge how much those future returns are worth in today's terms, ultimately informing their decision about whether or not to proceed with the investment.

While interest rates pertain to the cost of borrowing or the return on savings, and tax rates apply to income taxes, the capitalization rate focuses on the relationship between net operating income and property asset value, which is more specific to real estate assessments. The discount rate encompasses a broader application across various investment types, focusing directly on the expected return aspect, which is crucial for investors in gauging potential returns on different investments.