Northspread
Formula sheet/NISM Series XV: Research Analyst/Fundamentals of Risk and Return
[ FUNDAMENTALS OF RISK AND RETURN ]

ROI, Simple Return, Annualized Return & CAGR

Return on Investment(ROI%)=(Net Profit/Total Cost of Investment)×100\text{Return on Investment} (ROI \%) = (\text{Net Profit} / \text{Total Cost of Investment}) \times 100
Simple Holding Period Return(HPR)=(Ending Value−Beginning Value+Dividends)/Beginning Value\text{Simple Holding Period Return} (HPR) = (\text{Ending Value} - \text{Beginning Value} + Dividends) / \text{Beginning Value}
Simple Annualized Return=HPR×(12/Holding Period in Months)=HPR×(365/Holding Period in Days)\text{Simple Annualized Return} = HPR \times (12 / \text{Holding Period in Months}) = HPR \times (365 / \text{Holding Period in Days})
CAGR=[(End Value/Beginning Value)1/n]−1(where n is holding period in years)CAGR = [ (\text{End Value} / \text{Beginning Value})^{1 / n} ] - 1 (\text{where n is holding period in years})
Variables

CAGR captures multi-year compounding and geometric growth; standard for performance reporting.

Worked examples
CAGR Calculation for Multi-Year Investment

An investor bought shares of an IT company for Rs 2,50,000 on 1st April 2021. On 1st April 2026 (5 years later), the investment value is Rs 6,20,000. Calculate the Compounded Annual Growth Rate (CAGR).

Benjamin Graham Margin of Safety (MOS)

An analyst estimates the intrinsic value of HDFC Bank at Rs 2,100 per share using a DCF model. The stock is currently trading on NSE at Rs 1,640. Calculate the Margin of Safety percentage.