Rate of Return Calculator
Calculate annual rate of return and analyze investment performance
Calculate Rate of Return
Amount invested at the beginning
Total amount received at the end
Duration of the investment period
Regular deposits (positive) or withdrawals (negative) during investment period
Rate of Return Results
Performance Analysis
Example Calculation
Investment Scenario
Example: Steve's 10-year investment with his brother
Initial Investment: $1,000
Final Amount: $5,000
Investment Length: 10 years
Annual Deposits: $100
Calculation Process
Step 1: Use the compound rate of return formula
FV = PV(1+r)^n + PMT × [(1+r)^n - 1] / r
Where: FV = $5,000, PV = $1,000, PMT = $100, n = 10
Result: Annual Rate of Return = 12.38%
Interpretation
Steve earned an annual return of 12.38% on his investment. This is an excellent return, significantly above the historical stock market average of 7-10%. The total return was enhanced by the additional $100 annual contributions.
Return Benchmarks
Poor Return
< 3% annually
May not beat inflation
Average Return
3% - 8% annually
Typical bond/CD returns
Good Return
8% - 15% annually
Historical stock market range
Excellent Return
> 15% annually
Above market average
Rate Concepts
Simple Return
(Final - Initial) / Initial
Total return percentage
Annual Return
Compound annual growth rate
Accounts for compounding
Real Return
Return adjusted for inflation
True purchasing power gain
Common Applications
Stock Investments
Analyze stock performance
Real Estate
Property investment returns
Portfolio Analysis
Overall portfolio performance
Education ROI
Return on education investment
Business Investments
Evaluate business returns
Understanding Rate of Return
What is Rate of Return?
Rate of return is the net gain or loss of an investment over a specified time period, expressed as a percentage of the investment's initial cost. It's a fundamental measure used to evaluate the efficiency of an investment and compare different investment opportunities.
Types of Returns
- •Simple Return: Total percentage gain without time consideration
- •Annual Return: Compound annual growth rate (CAGR)
- •Real Return: Return adjusted for inflation effects
- •Total Return: Includes capital gains and income
Mathematical Foundation
Simple Rate of Return
ROR = (Final Value - Initial Value) / Initial Value
Basic percentage return calculation
Annual Rate with Cash Flows
FV = PV(1+r)^n + PMT × [(1+r)^n - 1] / r
Accounts for periodic contributions/withdrawals
Note: Our calculator uses Newton's method to solve complex return equations with periodic cash flows, providing accurate results for real-world scenarios.
Investment Analysis Applications
Portfolio Management
Compare returns across different asset classes and time periods
Investment Decisions
Evaluate whether investments meet return expectations
Performance Benchmarking
Compare investment performance against market indices