.ror-wrapper {
background: #ffffff;
padding: 30px;
border-radius: 12px;
box-shadow: 0 4px 20px rgba(0,0,0,0.08);
border: 1px solid #e0e0e0;
margin-bottom: 40px;
}
.ror-header {
text-align: center;
margin-bottom: 25px;
border-bottom: 2px solid #f0f0f0;
padding-bottom: 15px;
}
.ror-header h3 {
margin: 0;
color: #2c3e50;
font-size: 24px;
}
.ror-input-group {
margin-bottom: 20px;
}
.ror-input-group label {
display: block;
margin-bottom: 8px;
font-weight: 600;
color: #444;
font-size: 14px;
}
.ror-input-wrapper {
position: relative;
display: flex;
align-items: center;
}
.ror-input-prefix {
position: absolute;
left: 12px;
color: #777;
font-weight: 500;
}
.ror-input-suffix {
position: absolute;
right: 12px;
color: #777;
font-weight: 500;
font-size: 13px;
}
.ror-input {
width: 100%;
padding: 12px 12px 12px 30px;
border: 1px solid #ccc;
border-radius: 6px;
font-size: 16px;
transition: border-color 0.2s;
box-sizing: border-box;
}
.ror-input.no-prefix {
padding-left: 12px;
}
.ror-input:focus {
border-color: #3498db;
outline: none;
box-shadow: 0 0 0 3px rgba(52, 152, 219, 0.1);
}
.ror-btn {
width: 100%;
padding: 14px;
background-color: #2c3e50;
color: white;
border: none;
border-radius: 6px;
font-size: 16px;
font-weight: 700;
cursor: pointer;
transition: background-color 0.2s;
margin-top: 10px;
}
.ror-btn:hover {
background-color: #34495e;
}
.ror-results {
margin-top: 25px;
padding: 20px;
background-color: #f8f9fa;
border-radius: 8px;
border-left: 5px solid #27ae60;
display: none;
}
.ror-result-row {
display: flex;
justify-content: space-between;
margin-bottom: 12px;
padding-bottom: 12px;
border-bottom: 1px solid #e9ecef;
}
.ror-result-row:last-child {
border-bottom: none;
margin-bottom: 0;
padding-bottom: 0;
}
.ror-label {
color: #666;
font-size: 14px;
}
.ror-value {
font-weight: 700;
color: #2c3e50;
font-size: 16px;
}
.ror-main-value {
font-size: 20px;
color: #27ae60;
}
.ror-error {
color: #e74c3c;
font-size: 13px;
margin-top: 5px;
display: none;
}
.ror-grid {
display: grid;
grid-template-columns: 1fr 1fr;
gap: 20px;
}
@media (max-width: 600px) {
.ror-grid {
grid-template-columns: 1fr;
gap: 0;
}
}
function calculateRoR() {
var initial = parseFloat(document.getElementById('initialVal').value);
var final = parseFloat(document.getElementById('finalVal').value);
var divs = parseFloat(document.getElementById('dividends').value);
var years = parseFloat(document.getElementById('timePeriod').value);
var errorDiv = document.getElementById('rorError');
var resultsDiv = document.getElementById('rorResults');
// Reset error
errorDiv.style.display = 'none';
resultsDiv.style.display = 'none';
// Validation: Check for valid numbers
if (isNaN(initial) || isNaN(final) || initial = 0) {
document.getElementById('netGain').style.color = "#27ae60";
document.getElementById('simpleReturn').style.color = "#27ae60";
resultsDiv.style.borderLeftColor = "#27ae60";
} else {
document.getElementById('netGain').style.color = "#c0392b";
document.getElementById('simpleReturn').style.color = "#c0392b";
resultsDiv.style.borderLeftColor = "#c0392b";
}
// CAGR Calculation (only if years > 0)
var cagrRow = document.getElementById('cagrRow');
if (!isNaN(years) && years > 0) {
// Formula: (Ending / Beginning)^(1/t) – 1
// Note: We use totalFinalValue (price + dividends) as the ending value for Total Return CAGR
var base = totalFinalValue / initial;
if (base > 0) {
var cagr = (Math.pow(base, 1 / years) – 1) * 100;
document.getElementById('annualizedReturn').innerText = cagr.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2}) + "%";
cagrRow.style.display = 'flex';
} else {
cagrRow.style.display = 'none'; // Cannot calculate root of negative
}
} else {
cagrRow.style.display = 'none';
}
resultsDiv.style.display = 'block';
}
Understanding the Formula for Calculating Rate of Return
The Rate of Return (RoR) is one of the most fundamental metrics in finance, used to evaluate the performance of an investment over a specific period. Whether you are analyzing stocks, bonds, real estate, or a small business venture, knowing how to calculate your return is essential for making informed financial decisions. The formula helps investors determine the percentage change in the value of an asset, accounting for both capital appreciation and income generated.
The Basic Rate of Return Formula
The simplest version of the formula calculates the percentage growth or loss based on the net profit relative to the initial cost. The formula is:
RoR = [(Current Value – Initial Value) + Distributions] / Initial Value × 100
- Current Value: The market price of the asset today (or at the time of sale).
- Initial Value: The original price paid to acquire the asset.
- Distributions: Any income received during the holding period, such as dividends, interest payments, or rent.
How to Calculate Rate of Return: A Real-World Example
To understand the mechanics, let's look at a practical example using a stock investment.
Imagine you purchased stock for $5,000 (Initial Value). After three years, the stock is worth $6,500 (Current Value). During those three years, you also received $200 in dividends (Distributions).
Here is the step-by-step calculation:
- Calculate Total Ending Value: $6,500 (Value) + $200 (Dividends) = $6,700.
- Calculate Net Gain: $6,700 – $5,000 = $1,700.
- Divide by Initial Investment: $1,700 / $5,000 = 0.34.
- Convert to Percentage: 0.34 × 100 = 34%.
Your simple rate of return on this investment is 34%.
Simple Return vs. Annualized Return (CAGR)
While the simple rate of return tells you the total percentage gained, it does not account for the time factor. A 34% return over 1 year is fantastic, but a 34% return over 20 years is poor.
To solve this, investors use the Compound Annual Growth Rate (CAGR), which smooths out the return to show what you earned on an annual basis. This calculator automatically computes the annualized return if you input the holding period in years.
The formula for Annualized Return is:
CAGR = (Ending Value / Beginning Value)^(1 / n) – 1
Where n is the number of years. Using the previous example over 3 years, the annualized return would be approximately 10.23% per year, rather than just the flat 34% total.
Why Dividends Matter in RoR
Many novice investors make the mistake of calculating return based solely on price appreciation (Price Return). However, Total Return—which includes reinvested dividends and interest—provides a much more accurate picture of wealth accumulation. As shown in the calculator above, ignoring the "Distributions" field can significantly underestimate your actual investment performance.