Rate of Return Calculator
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.
Sources and External Resources
- Wikipedia – Time Value of Money & Rate of Return – Wikipedia’s entries on the time value of money and rate of return. It