Question

• What happens if the growth is less than the required rate of return?

Answer 1

Growth may be defined as the real return on the investmade made.
However required rate of return is the minimum return that a investor wants from making a particular investment. It varies on investor to investor as for a same investment required return can be different for 2 different investors.

If growth is less than the required rate of return it may not be an adequate investment for such investor as the investment is not fetching returns to meet his expected returns level. For Example if required rate of return is 5% and the investment is growing by 3% it may not be adequate for the investor. Hence, growth more than the required rate of return is always good and growth lower than the required rate of return is bad.