Calculating growth rate percentages allows you to evaluate increases in your investment, which helps you predict the investment's future value. Virtually any investment has a growth rate, even if this rate is zero, negative or positive. All that is required is a past and present value to calculate the growth rate between the two periods. If you wish to calculate the annual growth rate, then you also need the length of time between the two periods to average the annualized, compound growth-rate formula.
Straight-Line Growth Assessment
1. Locate the past and present values of the investment. If you are assessing the growth of a stock, these values can be found on any investment website. If you are assessing real estate growth rate, use the original appraisal value and have another appraisal performed now.
2. Subtract the present value from the past value. As an example, if your house was originally appraised at $100,000 but it's now worth $140,000, subtract $100,000 from $140,000, which leaves $40,000.
3. Divide this difference by the original value. Continuing with the example, $40,000 divided by $100,000 results in 0.4.
4. Multiply the result by 100 to convert it into percentage format. In the example, multiplying 0.4 by 100 calculates a straight-line growth rate of 40 percent.
Average Annual Compound Growth Assessment
1. Divide the present value by the past value. In the previous example, dividing $140,000 by $100,000 results in 1.4, or the overall growth factor.
2. Take the nth-root of this number, where “n” is the number of years between periods. This number can be a whole number or fractional years. Continuing with the example, if 2.5 years went by between the two appraisals, take the 2.5th-root of 1.4. On a scientific or financial calculator, enter “1.4,” press the button that displays "x" to the "y"-root, enter “2.5” and press "=". The result is 1.144.
3. Subtract 1 from the result. In the example, this leaves you with 0.144.
4. Multiply the result by 100 to convert it into percentage format. In the example, multiplying 0.144 by 100 calculates an average annual compound growth rate of 14.4 percent.
Items you will need
- Scientific or financial calculator
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