Calculate Simple Return and Compound Annual Growth Rate (CAGR)
Total Gain/Loss:$0.00
Total Return (ROI):0.00%
Annualized Rate (CAGR):0.00%
function calculateRateOfReturn() {
var initial = parseFloat(document.getElementById('ror_initial').value);
var final = parseFloat(document.getElementById('ror_final').value);
var years = parseFloat(document.getElementById('ror_years').value);
var displayDiv = document.getElementById('ror_result_display');
// Validation
if (isNaN(initial) || isNaN(final) || isNaN(years)) {
alert("Please enter valid numbers for all fields.");
return;
}
if (initial === 0) {
alert("Initial investment cannot be zero.");
return;
}
if (years <= 0) {
alert("Time period must be greater than 0.");
return;
}
// Calculations
var gain = final – initial;
// Simple Rate of Return: (Final – Initial) / Initial
var simpleRoR = (gain / initial) * 100;
// CAGR Formula: (Final / Initial)^(1/n) – 1
// Note: If Final/Initial is negative (unlikely in this context unless shorting), pow returns NaN for fractional exponents.
var cagr = 0;
if (final 0) {
// Handle total loss scenarios gracefully or return specific error
cagr = -100;
} else {
cagr = (Math.pow((final / initial), (1 / years)) – 1) * 100;
}
// Display Results
document.getElementById('res_gain').innerText = "$" + gain.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res_simple_ror').innerText = simpleRoR.toFixed(2) + "%";
document.getElementById('res_cagr').innerText = cagr.toFixed(2) + "%";
displayDiv.style.display = 'block';
}
How to Calculate Rate of Return on a Financial Calculator
Calculating the Rate of Return (RoR) is essential for investors to evaluate the performance of an investment over a specific period. Whether you are analyzing a stock, a real estate property, or a mutual fund, knowing your annualized return helps you compare different opportunities on an equal footing.
Understanding the Metrics
There are two primary ways to look at rate of return:
Simple Rate of Return (ROI): This tells you the total percentage growth from your starting point to your ending point. It does not account for how long it took to achieve that growth.
Compound Annual Growth Rate (CAGR): This is the geometric progression ratio that provides a constant rate of return over the time period. This is often what financial calculators solve for when you calculate "I/Y" (Interest per Year).
The Formulas
If you were doing this manually without a financial calculator, here is the math involved:
Total Return Formula: ((Ending Value – Initial Value) / Initial Value) × 100
CAGR Formula: ((Ending Value / Initial Value) (1 / Number of Years)) – 1
Using a Physical Financial Calculator (TI BA II Plus or HP 12C)
If you possess a physical financial calculator, you can solve for the annualized rate of return using the Time Value of Money (TVM) keys. Follow these steps:
Enter N: Input the number of years (or periods) and press N.
Enter PV: Input your initial investment amount. Note: You must enter this as a negative number (cash outflow). e.g., enter 10000, press +/- key, then press PV.
Enter FV: Input the ending value of the investment (positive number, cash inflow) and press FV.
Compute I/Y: Press CPT and then I/Y. The result displayed is your annualized rate of return.
Example Calculation
Let's say you invested $10,000 in a portfolio (PV). Five years later (N=5), the portfolio is worth $15,000 (FV).
Total Gain: $5,000
Simple Return: ($5,000 / $10,000) = 50%
Annualized Return (CAGR): Using the tool above or a financial calculator, the result is approximately 8.45%. This means your money grew at an average compound rate of 8.45% per year.
Using the calculator above provides an instant digital alternative to the manual keystrokes required on traditional financial hardware.