Someone please explain to me the difference between cost basis as a dollar term (like bought something at $80 which is now worth $100) vs the capital gains rate of return. What does the capital gains rate of return represent versus the cost basis?
Your cost bais is the cost of purchasing an asset. Your capital gains rate of return is how much you gained, as a percent, on your cost basis.
If you bought something for $80 dollars, your cost basis (call it your cost base) is $80. As the actual price of your investment moves around your cost basis never changes, unless your purchase more at difference prices.
You capital gains rate of return is simply your sale price less your cost base dvided into your cost base, aka your return on investment, capital yield, profit yeild, etc
Sale price - cost base = Capital gains
Capital gains rate of return = capital gains / cost base or (sales price - cost base) / sales price