The rate of return (RoR) is the percentage gain or loss on an investment over a specified period of time, relative to the initial cost of that investment. It measures how much an investment has increased or decreased in value, including any income such as dividends or interest received during the holding period

. Key points about Rate of Return:

• It is expressed as a percentage of the initial investment.
• RoR can apply to various assets like stocks, bonds, real estate, or art.
• A positive RoR indicates a profit, while a negative RoR indicates a loss.
• The basic formula for calculating RoR is:

Rate of Return=(Current Value−Initial Value+IncomeInitial Value)×100\text{Rate of Return}=\left(\frac{\text{Current Value}-\text{Initial Value}+\text{Income}}{\text{Initial Value}}\right)\times 100Rate of Return=(Initial ValueCurrent Value−Initial Value+Income​)×100

• For example, if you buy a stock at $60, receive $10 in dividends, and sell it at $80, the RoR would be (80−60)+1060×100=50%\frac{(80-60)+10}{60}\times 100=50%60(80−60)+10​×100=50%

• The RoR does not typically account for inflation or the time value of money unless adjusted (e.g., real rate of return or internal rate of return)

• Annualized rate of return (or annualized RoR) converts returns over different time periods into a yearly rate for easier comparison

In summary, the rate of return is a fundamental metric used by investors to evaluate the profitability and performance of their investments over time