How to Figure Annual Percentage Yield on an Investment Over 10 Years

by Mark Kennan, studioD

If you want to know the average return of an investment over a 10-year period, you cannot simply divide the total return by 10, because that wouldn't account for the effects of interest compounding. The annual percentage yield refers to the yearly interest rate needed to take an initial investment to a maturity value after accounting for compound interest. In addition to knowing the time, you need to know the starting and ending values. The annual percentage yield involves using decimal exponents, which require the use of a calculator.

Divide the value of your investment at maturity by the value of the initial investment 10 years prior. For example, if you invested $24,000 a decade ago and now it is worth $49,000, divide $49,000 by $24,000 to get 2.04167.

Raise the result to the 0.1 power, because 0.1 equals 1/10th. In this example, raise 2.04167 to the 0.1 power to get 1.073985838.

Subtract 1 to find the annual rate of return. In this example, take away 1 from 1.073985838 to get an annual rate of 0.073985838.

Multiply the result by 100 to find the annual percentage yield over the 10-year period. In this example, multiply 0.07399 by 100 to find the annual percentage yield equals 7.399 percent.

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."