Final answer:
The financial calculation that provides a percentage rate which measures the profitability of an investment is the Return on Investment (ROI). It is calculated by subtracting the initial investment cost from the final value, dividing by the initial cost, and multiplying by 100 to get a percentage.
Step-by-step explanation:
The financial calculation that provides a percentage rate measuring the relationship between the amount gained from an investment and the amount invested is known as the Return on Investment (ROI). This metric is widely used in the finance and business sectors to assess the profitability of an investment. To calculate ROI, one would subtract the initial cost of the investment from the final value of the investment (which includes any profits made), then divide this result by the initial cost of the investment, and finally, multiply by 100 to get a percentage. For example, if you invested $100 in a venture and sold your investment for $120 a year later, your ROI would be (($120 - $100) / $100) × 100 = 20%.
In contrast, other measures like Net Present Value (NPV) and Internal Rate of Return (IRR) are more sophisticated financial metrics. NPV calculates the value of future cash flows in today's dollars, while IRR is the discount rate that makes the NPV of all cash flows from a particular project equal to zero. The Payback Period is the time it takes for an investment to generate an amount of return to cover its cost; however, unlike ROI, it does not give a percentage rate of return.