1. What is Rate of Return?

The Rate of Return (ROR) is the gain or loss on an investment over a specified time period, expressed as a percentage of the investment's initial cost. It measures the performance of investments and helps compare different investment opportunities.

2. How Does the Calculator Work?

The calculator uses the Rate of Return formula:

Where:

• \( End\ Value \) — The current or ending value of the investment
• \( Beginning\ Value \) — The initial investment amount

Explanation: The formula calculates the percentage 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 evaluating investment performance, comparing different investment options, and making informed financial decisions.

4. Using the Calculator

Tips: Enter the beginning value (initial investment) and ending value (current value) in USD. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's a good Rate of Return?
A: This depends on the investment type and risk level. Generally, 7-10% is considered good for stock market investments over the long term.

Q2: How is Rate of Return different from ROI?
A: ROI is typically used for single periods while ROR can be calculated for multiple periods and annualized for comparison.

Q3: Can Rate of Return be negative?
A: Yes, a negative ROR indicates a loss on the investment.

Q4: Does this calculator account for time periods?
A: This calculates simple ROR. For annualized returns over multiple years, you would need to adjust the calculation.

Q5: Should I include dividends in the end value?
A: For total return calculations, yes - include all cash flows like dividends and interest in the end value.