How to Calculate a Growth Rate
- 1). Divide the final value of the investment by the initial value of the investment. For example, if you are finding the growth rate necessary to meet your savings goal in 10 years, are starting with $15,000 and want it to grow to $35,000, you would divide $35,000 by $15,000 to get 2.333333333.
- 2). Divide 1 by the number of years over which the grow will occur or has occurred. In this example, you would divide 1 by 10, because the growth will take place over 10 years, to get 0.1.
- 3). Raise the step 1 result to the power of the step 2 result. In this example, you would raise 2.333333333 to the 0.1th power to get 1.08842292.
- 4). Subtract 1 from the step 3 result to find the annual growth rate expressed as a decimal. In this example, you would take 1 away from 1.08842292 to find the annual growth rate expressed as a decimal to be 0.08842292.
- 5). Move the decimal point to digits to the right to convert the annual growth rate from a decimal to a percentage. Completing the example, you would move the decimal point on 0.08842292 two spaces to the right to find you would need an annual growth rate of about 8.84 percent per year to get $15,000 to grow to $35,000 in 10 years.
Source...