A rate of return (RoR) is the net gain or loss of an investment over a specified time period, expressed as a percentage of the investment’s initial cost.

Since RoR is a measure of the profitability of any form of investment, it is used by varied investors.

**Formula to calculate rate of return.**

**Example:**

If the initial cost of investment was $10,000 and the ending value of the same investment after a few years was $ 18,000. calculate the rate of return.

Thus, the rate of return is 44.4%.