Average Annual Return Formula

The average amount of money earned by the investment per year over a given time period is average annual return. The gain on the investment is considered as the income received on the sale of the investment. The amount of time taken to recover the investments is the rate of return. Take the rate of return percentage for each year and find the aar using the average annual return formula. The aar is the addition of all the rate of return per year divided by the total number of years.

Formula :

Average Annual Return (AAR) = ( r1 + r2 +...+ rn) / n


r1 + r2 +...+ rn = Return Rate For Each Year
n = Number Of Years

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The average of annual return is used by investors to find the performance of the investments over a period of time. Find the aar using the average annual return formula.

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