What Is The Rate Of Return And How To Calculate It?

Measures The Net Profit or Loss

The rate of return (RoR) measures the net profit or loss on an investment expressed as a percentage of the initial cost

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Calculating RoR involves determining the percentage change from the initial investment to its current value

The RoR Formula

The RoR formula, [(Current Value - Initial Value) / Initial Value] x 100, offers a basic method for calculation

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RoR on stocks and bonds varies in calculation, with stock RoR factoring in dividends and selling price gains, while bond RoR considers interest income and premium value in relation to the initial investment.

Inflation Effects

The simple rate of return is nominal, as it doesn't account for inflation effects

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