Rate of Return (RoR)Definition
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:
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: