1. What is the Actual Rate of Return?

The Actual Rate of Return (RoR) measures the percentage gain or loss on an investment relative to the initial investment amount. It provides a clear picture of investment performance over a specific period.

2. How Does the Calculator Work?

The calculator uses the Actual Rate of Return formula:

Where:

• \( CV \) — Current Value of the investment ($)
• \( IV \) — Initial Value of the investment ($)

Explanation: The formula calculates the percentage change in value from the initial investment to the current value.

3. Importance of Rate of Return Calculation

Details: Calculating the actual rate of return is essential for evaluating investment performance, comparing different investment options, and making informed financial decisions.

4. Using the Calculator

Tips: Enter the current value and initial value in dollars. Both values must be positive numbers, and the initial value must be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What does a negative rate of return indicate?
A: A negative rate of return indicates a loss on the investment, where the current value is less than the initial investment.

Q2: How is this different from annualized return?
A: The actual rate of return shows total return over the entire period, while annualized return shows the average yearly return.

Q3: Should I include dividends in the current value?
A: Yes, for accurate calculation, include all returns such as dividends, interest, and capital gains in the current value.

Q4: Can I use this for any time period?
A: Yes, this calculation works for any time period, but it doesn't account for the time value of money or compounding effects.

Q5: What is considered a good rate of return?
A: This varies by investment type and market conditions, but generally, a positive return that exceeds inflation is considered good.