DEFINITION of 'Yearly Rate Of Return Method '
More commonly referred to as annual percentage rate. It is the interest rate earned on a fund throughout an entire year. The yearly rate of return is calculated by taking the amount of money gained or lost at the end of the year and dividing it by the initial investment at the beginning of the year. This method is also referred to as the annual rate of return or the nominal annual rate.
BREAKING DOWN 'Yearly Rate Of Return Method '
Yearly Rate of Return = End of the year value - beginning of the year value
beginning of the year value
The yearly rate of return method give the owners an idea of how their investment in the company is doing year over year.