# Gross Rate of Return

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## Definition of 'Gross Rate of Return'

The gross rate of return is a measure of the profit earned on an investment, before deducting any fees or taxes. It is calculated by dividing the total return on an investment by the initial investment amount.

The gross rate of return is often used as a benchmark to compare different investments. However, it is important to note that the gross rate of return does not take into account the time value of money, which means that it does not account for the fact that money today is worth more than money in the future.

To calculate the gross rate of return, you can use the following formula:

```
Gross rate of return = (Ending value - Initial value) / Initial value
```

Where:

* Ending value is the value of the investment at the end of the investment period
* Initial value is the value of the investment at the beginning of the investment period

For example, if you invest \$100 and it grows to \$120 over a year, your gross rate of return would be 20%.

The gross rate of return is a useful metric for comparing different investments, but it is important to remember that it does not take into account the time value of money. If you are looking for an investment that will maximize your return, you should also consider the net rate of return, which takes into account the time value of money.

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