What Is An Annualized Rate of Return?

Ending Value = Price of investment at the end of the period

Beginning Value = Price of investment at the beginning of the period

n = Number of years

One may also replace 1/n with 365/n for more accurate results. 

Limitations of Using the AROR Calculation

Both methods of calculating an annualized return have limitations, depending on the situation. The simple annualized return method can be misleading if the investment returns don’t occur evenly throughout the year.