Annual rate of return (ARR) is a way of calculating investment returns on an annual basis.

ARR is used mainly as a general comparison between multiple projects to determine the expected rate of return from each project.

**Formula to calculate annual rate of return.**

**Example:**

Suppose the beginning value of an investment was $ 300,000 and its current value is $500,000. If the investment was to last for 5 years, calculate the annual rate of return.

Thus, the annual rate of return is 10.6%.