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Growth Rate Formula:
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The Money Growth Rate Calculator calculates the compound annual growth rate (CAGR) of an investment or savings over a specified period. It helps determine the average annual growth rate needed to go from present value to future value.
The calculator uses the growth rate formula:
Where:
Explanation: The formula calculates the constant annual growth rate that would be required for an investment to grow from its present value to its future value over the specified number of periods.
Details: Understanding growth rates is essential for investment analysis, financial planning, and comparing different investment opportunities. It provides a standardized way to measure performance over time.
Tips: Enter future value and present value in the same currency units, and specify the number of years. All values must be positive numbers.
Q1: What is the difference between simple and compound growth rate?
A: Simple growth rate assumes linear growth, while compound growth rate accounts for the effect of compounding where returns generate additional returns over time.
Q2: Can this calculator be used for monthly periods?
A: Yes, but ensure that all time periods are consistent. If using months, convert the final result to annual rate by multiplying by 12.
Q3: What does a negative growth rate indicate?
A: A negative growth rate indicates that the investment has decreased in value over the specified period.
Q4: How accurate is this calculation for volatile investments?
A: This calculates average annual growth and may not reflect volatility. For highly volatile investments, additional risk metrics should be considered.
Q5: Can I use this for business revenue growth?
A: Yes, this formula is commonly used to calculate revenue growth rates, customer growth, and other business metrics over time.