Article ID: 123198 - View products that this article applies to.
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The "average growth rate" is a calculation used by financial investors to determine the best investment over time given present value, future value, and number of periods per year of an investment. This calculation can also be referred to as an "annualized yield rate" or "average rate of return." Note that an annualized rate is always consistent in that it results in percent-per-year figures.
Microsoft Excel does not include an average growth rate function. However, you can use the following formula for this calculation
=((FV/PV)^(1/n))^m-1where FV is future value, PV is present value, n is the number of investment periods, and m is the periods per year factor.
To calculate the AGR result in Microsoft Excel by using the formula shown in the "Summary" section of this article, follow these steps:
Example 1Assume an investment where FV=$120,000, PV=$10,000, n=120 periods, and m=12 periods/year. Type these values in the worksheet as follows:
The formula in cell E2 calculates = .282089 (an AGR of 28.21% per year).
A2: 120000 B2: 10000 C2: 120 D2: 12
Example 2Assume an investment where FV=$120,000, PV=$10,000, n=8 periods, and m=1 period/year. Type these values in the worksheet as follows:
The formula in cell E3 calculates = .364262 (an AGR of 36.43% per year).
A3: 120000 B3: 10000 C3: 8 D3: 1
Handbook of Fixed Income Securities, Richard D. Irwin Inc., 1991, pages 79-80.
Article ID: 123198 - Last Review: January 19, 2007 - Revision: 2.3