Rate of Return Calculator
What is Rate of Return?
The Rate of Return (RoR) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. RoR is generally expressed as a percentage and indicates how much profit or loss has been generated on an investment relative to its cost. It's a fundamental metric for investors to understand the profitability of their ventures.
The basic formula for calculating the simple Rate of Return is:
$$ \text{Rate of Return} = \frac{\text{Final Value} – \text{Initial Investment}}{\text{Initial Investment}} \times 100\% $$
For annualized return over multiple years, the formula is more complex and often involves compound growth. However, for a basic understanding, we often look at the total return over the period.
In this calculator, we focus on the simple rate of return for the given period. If you need to annualize the return over multiple years, consider using the Compound Annual Growth Rate (CAGR) formula.
How to Use This Calculator:
- Initial Investment: Enter the total amount of money you initially invested.
- Final Value: Enter the total value of your investment at the end of the period.
- Time Period: Enter the duration of the investment in years. This field is used for context in understanding the return period.
- Click the "Calculate" button to see your Rate of Return.
Example:
Let's say you invested $10,000 in a stock (Initial Investment = 10000). After 1 year, the stock is valued at $12,000 (Final Value = 12000). The Time Period is 1 year.
Calculation:
$$ \text{Rate of Return} = \frac{12000 – 10000}{10000} \times 100\% = \frac{2000}{10000} \times 100\% = 0.20 \times 100\% = 20\% $$
This calculator will output a Rate of Return of 20%.
function calculateRateOfReturn() {
var initialInvestment = parseFloat(document.getElementById("initialInvestment").value);
var finalValue = parseFloat(document.getElementById("finalValue").value);
var timePeriod = parseFloat(document.getElementById("timePeriod").value);
var resultDisplay = document.getElementById("result");
if (isNaN(initialInvestment) || isNaN(finalValue) || isNaN(timePeriod)) {
resultDisplay.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (initialInvestment === 0) {
resultDisplay.innerHTML = "Initial investment cannot be zero.";
return;
}
if (timePeriod <= 0) {
resultDisplay.innerHTML = "Time period must be greater than zero.";
return;
}
var profit = finalValue – initialInvestment;
var rateOfReturn = (profit / initialInvestment) * 100;
resultDisplay.innerHTML = "Your Rate of Return is:
" + rateOfReturn.toFixed(2) + "% over " + timePeriod + " year(s).";
}
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