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 March 12, 2026. Next review due March 1, 2027.

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

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Rate of return

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Definitions

Initial investment: The initial amount of money invested in a financial instrument, asset, or project.
Final amount received: The total amount received or expected to be received at the end of the investment period, including any returns or profits.
Investment length: The duration of time over which the investment is made, typically measured in years or months.

What is rate of return?

Rate of return is a financial metric that measures the percentage change in the value of an investment over a specific period, taking into account both income generated and capital appreciation. It is often abbreviated as ROR.

How to calculate rate of return

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

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

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

FAQs

How to calculate internal rate of return?

The internal rate of return (IRR) is calculated by setting the net present value (NPV) of cash flows generated by an investment equal to zero and solving for the discount rate that achieves this condition.

How to calculate interest rate of return?

The interest rate of return is calculated by dividing the total interest earned on an investment by the initial investment amount, expressed as a percentage.

Is a higher rate of return always better?

While a higher rate of return often indicates better performance, it's essential to consider other factors such as risk, volatility and investment objectives before determining the suitability of an investment.

What are real and nominal rates of return?

The nominal rate of return is the actual rate of return on an investment, while the real rate of return adjusts for inflation, providing a more accurate measure of purchasing power.