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)
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.