# What is Rate of Return (RoR)?

## Define (RoR) In Simple Terms

The rate of return, or RoR, is the net gain or loss on an investment over a period of time.

It is expressed as a percentage of the principal of the investment.

Calculating the rate of return gets the percentage change from the beginning of the period to the end.

## Formula for Calculating (RoR)

The formula for calculating simple rate of return is as follows:

Simple rate of return is sometimes called the basic growth rate or return on investment.

## Example of (RoR)

For example, say that an investor purchased a short-term **bond**, such as a US Treasury Bill, for $950 and redeemed it for its face value of $1000 at maturity.

This bond would have a rate of return $50 / $1000, or 5%.

Alternatively, say an investor purchases 100 shares of a company for $50 each.

The next year, they sell each share for $60 apiece.

They also earned $100 in **dividends**. The rate of return would be:

Rate of return doesn’t only apply to securities.

Any asset that has a cost to purchase and will produce **income** at some point in the future, from selling or otherwise, has a calculable rate of return.