How to Annualize a Percent

by Matt McGew

Annualizing a percent allows you to estimate the annual rate of return for a percent calculation that covers a shorter duration of time such as a month or quarter. While annualizing a percent does not guarantee that the actual annual percent will equal the estimated annualized figure, performing this calculation can provide you with a basic estimate. Investors and businesses commonly use this calculation to make projections.

1. Determine the percent you want to annualize. For example, assume an investment has a monthly return of 3 percent.

2. Determine the number of periods needed to annualize the percent from Step 1. For example, a monthly return would have a multiplier of "12" and a quarterly return would have a multiplier of "4".

3. Multiply the percent by the multiplier. Continuing the earlier example, .03 multiplied by 12 equals 36 percent. This figure represents the annualized percent.

References

  • "Principles of Finance"; Scott Besley and Eugene Brigham; 2008