1. What is Rate of Return (ROR)?

Rate of Return (ROR) is a fundamental financial metric that measures the percentage gain or loss on an investment relative to its initial cost. It provides investors with a standardized way to evaluate investment performance over time.

2. How Does the Calculator Work?

The calculator uses the ROR formula:

Where:

• \( \text{End Value} \) — Current or final value of investment
• \( \text{Start Value} \) — Initial investment amount
• \( ROR \) — Rate of Return expressed as percentage

Explanation: The formula calculates the percentage change in value from the start to the end of the investment period, providing a clear measure of investment performance.

3. Importance of ROR Calculation

Details: ROR is essential for comparing different investment opportunities, assessing portfolio performance, making informed investment decisions, and evaluating the effectiveness of investment strategies over time.

4. Using the Calculator

Tips: Enter the initial investment amount as Start Value and the current or final investment value as End Value. Both values must be positive numbers, with Start Value greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Rate of Return?
A: A "good" ROR depends on the investment type, risk level, and market conditions. Generally, returns above inflation (2-3%) are considered positive, while returns above 7-10% are considered strong for long-term investments.

Q2: Can ROR be negative?
A: Yes, ROR can be negative if the investment loses value. A negative ROR indicates that the investment is worth less than the original amount invested.

Q3: How does ROR differ from ROI?
A: ROR and ROI (Return on Investment) are often used interchangeably, but ROR typically refers to the percentage return over time, while ROI can be expressed in both percentage and absolute terms.

Q4: Does this calculator account for time period?
A: This calculator provides the simple ROR without considering the time factor. For annualized returns, additional calculations considering the investment period are needed.

Q5: What are the limitations of simple ROR?
A: Simple ROR doesn't account for investment duration, compounding effects, inflation, taxes, or additional contributions/withdrawals during the investment period.