Annual Average Rate Calculator

Annual Average Rate Calculator calculator can be used to calculate the average annual growth rate over a specified period based on initial and final values.

Input Parameters

Calculation Results

Calculation Formula

((Final Value / Initial Value)^(1/Period) - 1) * 100%

Where:
Initial Value: The starting value of the investment
Final Value: The ending value of the investment
Period: The number of years the investment was held

Annual Average Rate Calculator Calculator Usage Guide

Learn how to use the Annual Average Rate Calculator and its working principles

How to Use the Calculator

  1. Enter your initial investment value in the "Initial Value" field.
  2. Enter your final investment value in the "Final Value" field.
  3. Enter the number of years the investment was held in the "Period" field.
  4. Click the "Calculate" button to compute the annual average rate.
  5. The calculator will display the annual average rate as a percentage and in decimal form.

Understanding the Annual Average Rate

The Annual Average Rate (AAR) is a measure of the average annual growth rate of an investment over a specified period. It's calculated using the formula:

AAR = ((Final Value / Initial Value)^(1/Period) - 1) * 100%

This formula gives you the compound annual growth rate, which represents the consistent rate at which your investment would have grown each year to reach the final value.

Example

Suppose you invested $10,000 (initial value) which grew to $15,000 (final value) over 5 years (period). The annual average rate would be:

AAR = (($15,000 / $10,000)^(1/5) - 1) * 100% = 8.45%

This means your investment grew at an average rate of 8.45% per year.

Applications

The Annual Average Rate Calculator can be used for:

  • Evaluating the performance of investments
  • Comparing different investment options
  • Estimating future growth based on historical data
  • Assessing the success of business ventures or projects