AAR Calculators

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AAR Calculator

Enter any 2 values to calculate the missing variable

Annual Payment Amount ($) Present Value of the Annuity ($) Annual Annuity Rate (%)

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The AAR Calculator is a financial savior that is made to calculate the Average Annual Return (AAR) of an investment. AAR represents the average percentage return on an investment over a given period.

Formula:

The formula is:

$$\text{AAR} = \left( \frac{\text{PMT}}{\text{PV}} \right) \times 10$$

To calculate the Accounting Rate of Return (AAR), divide the average annual profit or payment (PMT) by the initial investment or present value (PV). Then, multiply the result by 100 to express the result as a percentage.  $$$$Variables:

Variable	Meaning
AAR	Accounting Rate of Return (percentage)
PMT	Average Annual Profit or Payment
PV	Initial Investment or Present Value (the amount invested)
100	Multiplied by 100 to convert the ratio into a percentage

Solved Calculations :

Example 1:

Given:

• Average Annual Profit (PMT) = $5,000
• Initial Investment (PV) = $25,000

Calculation	Instructions
Step 1: AAR = $\left( \frac{\text{PMT}}{\text{PV}} \right) \times 100$	Start with the formula.
Step 2: AAR = $\left( \frac{5,000}{25,000} \right) \times 100$	Replace PMT with 5,000 and PV with 25,000.
Step 3: AAR = $0.2 \times 100$	Divide 5,000 by 25,000 to get 0.2.
Step 4: AAR = 20%	Multiply by 100 to get the percentage.

Answer:
The AAR is 20%.

Example 2:

Given:

• Average Annual Profit (PMT) = $8,000
• Initial Investment (PV) = $40,000

Calculation	Instructions
Step 1: AAR = $\left( \frac{\text{PMT}}{\text{PV}} \right) \times 100$	Start with the formula.
Step 2: AAR = $\left( \frac{8,000}{40,000} \right) \times 100$	Replace PMT with 8,000 and PV with 40,000.
Step 3: AAR = $0.2 \times 10$	Divide 8,000 by 40,000 to get 0.2.
Step 4: AAR = 20%	Multiply by 100 to get the percentage.

Answer:
The AAR is 20%.

What is AAR Calculator ?

The AAR Calculator helps you easily calculate the Average Annual Return (AAR) of an investment over a specific period. AAR is a measure of the average percentage increase in value of an investment per year.

This metric is useful for investors to assess the overall growth or performance of an investment. It provides a simple way to compare the performance of different investments over time.

AAR is often confused with ARR (Accounting Rate of Return), which is a profitability ratio used to evaluate the financial viability of an investment or project. While ARR focuses on accounting income, AAR is based on actual returns.

Final Words:

The Annual Annuity Rate (AAR) Calculator is a valuable tool for assessing the annual rate of return on annuity investments. It provides clarity and transparency in financial planning, enabling individuals to make informed decisions about their future financial well-being.