1. What is Rate of Return?

The Rate of Return (ROR) is a measure of the profit or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost. It 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)

Explanation: The formula calculates the relative change in value from the beginning to the end of the investment period.

3. Importance of Rate of Return

Details: Rate of Return is crucial for comparing different investments, assessing portfolio performance, and making informed financial decisions.

4. Using the Calculator

Tips: Enter the beginning and ending values in USD. Both values must be positive numbers, with the beginning value greater than zero.

5. Frequently Asked Questions (FAQ)

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

Q2: How is this different from annualized return?
A: Rate of Return shows total return over the entire period, while annualized return shows the equivalent yearly return rate.

Q3: Can the rate be negative?
A: Yes, a negative rate indicates a loss on the investment.

Q4: Does this account for dividends or interest?
A: Only if they're included in the ending value. For total return, include all cash flows.

Q5: What time period should I use?
A: Use any period you want to analyze (days, months, years), but be consistent when comparing investments.