Question 1

How is ROI calculated?

Accepted Answer

ROI is calculated as ((Final Value - Investment Amount) / Investment Amount) x 100. For example, if you invested Rs 1,00,000 and it grew to Rs 2,50,000, your ROI is ((2,50,000 - 1,00,000) / 1,00,000) x 100 = 150%. Annualized ROI adjusts this for the holding period to give a per-year return rate.

Question 2

What is the difference between ROI and CAGR?

Accepted Answer

ROI shows the total percentage return regardless of time. CAGR (Compound Annual Growth Rate) normalizes the return to a per-year basis assuming compounding. For comparing investments held over different periods, annualized ROI (which is CAGR) is more meaningful than total ROI.

Financial Calculators