Actual Rate of Return Calculator

Actual Rate of Return Formula:

\[ ARR = \frac{(End\:Value - Begin\:Value)}{Begin\:Value} \times \frac{100}{Years} \]

Actual Rate of Return (ARR):

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1. What is Actual Rate of Return?

The Actual Rate of Return (ARR) measures the percentage gain or loss on an investment over a period of time, expressed as an annual percentage. It accounts for the beginning and ending values of the investment and the time period.

2. How Does the Calculator Work?

The calculator uses the ARR formula:

\[ ARR = \frac{(End\:Value - Begin\:Value)}{Begin\:Value} \times \frac{100}{Years} \]

Where:

\( End\:Value \) — Final value of investment
\( Begin\:Value \) — Initial investment amount
\( Years \) — Time period in years

Explanation: The formula calculates the percentage change in value, then annualizes it by dividing by the number of years.

3. Importance of ARR Calculation

Details: ARR helps investors compare performance across different investments and time periods, and assess whether an investment met expectations.

4. Using the Calculator

Tips: Enter the initial investment value, final value, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is ARR different from CAGR?
A: ARR shows simple annual growth, while CAGR (Compound Annual Growth Rate) accounts for compounding effects.

Q2: What is a good ARR?
A: This depends on the investment type and risk profile. Generally, higher is better, but should be compared to benchmarks.

Q3: Can ARR be negative?
A: Yes, if the investment lost value over the period, ARR will be negative.

Q4: Does ARR account for additional contributions?
A: No, this simple calculation assumes no additional contributions or withdrawals.

Q5: When is ARR most useful?
A: For quick comparisons of investments held for similar time periods.