# Rate of return calculator

To calculate the rate of return, you’ll need the initial investment value, the final investment value, and the time period over which the investment was held.

Page written by Ian Hawkins. Last reviewed on July 17, 2024. Next review due April 1, 2025.

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This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out a loan.

Rate of return

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## What is rate of return?

Rate of return is a financial metric used to measure the gain or loss on an investment relative to the initial investment amount. It is expressed as a percentage and indicates how profitable an investment has been over a specified period.

## How to calculate rate of return

The formula for calculating the rate of return is as follows:

Rate of Return=(Final Value−Initial Value)/Initial Value×100

Here’s how to calculate it step-by-step:

1. Subtract the Initial Value from the Final Value. This will give you the total change in value over the investment period.
2. Divide the result from step 1 by the Initial Value. This will give you the relative change as a decimal.
3. Multiply the result from step 2 by 100 to convert it into a percentage.

### Case Example:

Let’s say you invest $10,000 in Company X’s stock at the beginning of the year. At the end of the year, your investment is worth$11,500 after accounting for dividends received. To calculate the rate of return on your investment:

Using the numbers from our example: Rate of Return=($11,500−$10,000/\$10,000)×100%=15%

This means your rate of return on the investment in Company X’s stock for that year is 15%. It’s important to note that rate of return can vary widely depending on the type of investment, market conditions, and time period analyzed.