![]() ![]() Therefore, Adam realized a 35% return on his shares over the two-year period. Lastly, determine how much it cost Adam to purchase 10 shares of Company A: 10 shares x $20 = $200 (Cost of purchasing 10 shares) Next, calculate how much he sold the shares for: 10 shares x $25 = $250 (Gain from selling 10 shares) To determine the rate of return, first, calculate the amount of dividends he received over the two-year period: 10 shares x ($1 annual dividend x 2) = $20 in dividends from 10 shares Adam would like to determine the rate of return during the two years he owned the shares. After holding them for two years, Adam decides to sell all 10 shares of Company A at an ex-dividend price of $25. In that time frame, Company A paid yearly dividends of $1 per share. Adam holds onto shares of Company A for two years. It would be calculated as follows: (($15 + $1 – $10) / $10) x 100 = 60% Example Rate of Return CalculationĪdam is a retail investor and decides to purchase 10 shares of Company A at a per-unit price of $20. For example, if a share costs $10 and its current price is $15 with a dividend of $1 paid during the period, the dividend should be included in the ROR formula. Keep in mind that any gains made during the holding period of the investment should be included in the formula. The standard formula for calculating ROR is as follows: Watch this short video to quickly understand the main concepts covered in this guide, including the definition of rate of return, the formula for calculating ROR and annualized ROR, and example calculations. When the ROR is positive, it is considered a gain, and when the ROR is negative, it reflects a loss on the investment. ![]() In other words, the rate of return is the gain (or loss) compared to the cost of an initial investment, typically expressed in the form of a percentage. ![]() A Rate of Return (ROR) is the gain or loss of an investment over a certain period of time. ![]()
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