Rate of Return

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 17, 2022

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)

For example, say that an investor purchased a short-term bond, such as a US Treasury Bill, for $950 and redeemed it for its face value of $1000 at maturity. 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. Any asset that has a cost to purchase and will produce income at some point in the future, from selling or otherwise, has a calculable rate of return.

 

Rate of Return (RoR) FAQs

What is RoR in finance?

RoR stands for the rate of return in finance.

What is a Rate of Return?

The rate of return, or RoR, is the net gain or loss on an investment over a period of time.

What is the formula for the Rate of Return?

The formula to calculate the rate of return is: ((current value-orginal value)/original value)*100.

What is an example of a Rate of Return?

For example, say that an investor purchased a short-term bond, such as a US Treasury Bill, for $950 and redeemed it for its face value of $1000 at maturity. This bond would have a rate of return $50 / $1000, or 5%.

Does Rate of Return apply to other assets?

Any asset that has a cost to purchase and will produce income at some point in the future, from selling or otherwise, has a calculable rate of return.

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®), author of The Handy Financial Ratios Guide, 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.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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