Rok Calculator

Historical Background

The Rate of Return (RoR), also known as ROI, is a key metric used to calculate the profitability or growth of an investment over time. It has long been a cornerstone in financial planning, allowing investors to project the potential future value of their investments. The concept of growth rate calculation became widely adopted in the 20th century with the rise of modern portfolio theory.

Calculation Formula

The formula used to calculate the future value of an investment based on annual growth rate is as follows:

\[ \text{Future Value} = \text{Investment Amount} \times \left(1 + \frac{\text{Growth Rate}}{100}\right)^{\text{Years}} \]

Example Calculation

Suppose you invest $1,000 at an annual growth rate of 5% for 10 years. The calculation would be:

\[ \text{Future Value} = 1,000 \times \left(1 + \frac{5}{100}\right)^{10} = 1,000 \times 1.6289 = 1,628.89 \text{ dollars} \]

After 10 years, your investment will grow to $1,628.89.

Importance and Usage Scenarios

This calculation is crucial for long-term investors, helping to estimate the growth of savings, retirement funds, or portfolios over time. It assists in financial planning, allowing individuals and businesses to make informed decisions about investment opportunities and assess potential returns.

Common FAQs

1. What is RoR?

   • Rate of Return (RoR) represents the percentage increase or decrease of an investment's value over a specified period of time.

2. What is a good growth rate for investments?

   • A "good" growth rate varies by asset type and market conditions, but long-term stock market returns typically average between 6% and 8%.

3. Can the ROK calculator account for compound interest?

   • Yes, this calculator uses compound growth, reflecting the reinvestment of returns.

This ROK Calculator is a powerful tool for assessing the future value of investments, providing a clear picture of how much your money could grow over time.