# Rate of Return Calculator

LAST UPDATE: September 25th, 2020

## Definition – What is a Rate of Return?

Rate of return (RoR) is the rate that a financial stream gains or loses over time. It is listed as a percentage and usually calculated as a decimal.

In terms of time value of money, rate of return is always calculated over the compounding period. It is not necessarily an annual rate.

## Formula – How is Rate of Return is calculated

We do not not have a specific formula for rate of return.

This calculator computes rate of return by guessing a rate of return and calculating a present value using the rest of the data to check if the result is accurate. It then tries a different rate of return until it finds a match to the present value.

All rates of return in this calculator should be tested against a present value, future value, or payment calculator to double-check the results.

The test upper-bounds of the calculator are 11% and the lower bounds are -1%.

The rate of return is listed as the rate for each compounding period. It is only an annualized rate if the compounding period is an annual one.