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.
Rate of Return (RoR) Definition FAQs
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.