1. What is Rate of Return?

The Rate of Return (ROR) measures the gain or loss on an investment relative to the amount invested. It's expressed as a percentage or decimal and helps investors evaluate the performance of their investments.

2. How Does the Calculator Work?

The calculator uses the Rate of Return formula:

Where:

• \( End \) — Ending value of investment (USD)
• \( Begin \) — Beginning value of investment (USD)
• \( Income \) — Any income received from the investment (USD)

Explanation: The formula calculates the total return (capital gains plus income) relative to the original investment.

3. Importance of Rate of Return

Details: Rate of Return is fundamental for comparing investment performance, assessing profitability, and making informed investment decisions.

4. Using the Calculator

Tips: Enter all values in USD. The beginning value must be greater than zero. The calculator provides results in both decimal and percentage formats.

5. Frequently Asked Questions (FAQ)

Q1: What's a good rate of return?
A: This depends on the investment type and risk. Historically, stocks average 7-10% annually, while bonds average 3-5%.

Q2: How is ROR different from ROI?
A: ROI typically measures total return over the entire investment period, while ROR can measure periodic returns (annual, monthly).

Q3: Can ROR be negative?
A: Yes, if the ending value plus income is less than the beginning value, the ROR will be negative, indicating a loss.

Q4: Should I include dividends in income?
A: Yes, all income received from the investment (dividends, interest, etc.) should be included in the income field.

Q5: How does time period affect ROR?
A: This calculator gives a simple ROR. For annualized returns over multiple periods, you'd need to adjust the calculation.