Enter the initial investment, the gain rate per year, and the time period into the calculator to determine the cumulative gain. This calculator helps in understanding the growth of an investment over time.
- Cumulative Yield Ratio Calculator
- Cumulative Percentage Calculator
- Average Return on Investment Calculator
Cumulative Gain Formula
The following formula is used to calculate the cumulative gain:
CG = P * ((1 + r)^t - 1)
Variables:
- CG is the cumulative gain ($)
- P is the initial investment ($)
- r is the gain rate per period (expressed as a decimal)
- t is the time period (years)
To calculate the cumulative gain, subtract one from the result of one plus the gain rate raised to the power of the time period, and then multiply by the initial investment.
What is Cumulative Gain?
Cumulative gain is the total amount of gain an investment has earned, not just the amount it has increased in value over a specific period. It takes into account the compound interest effect, where the gains from one period benefit from the gains of previous periods. This concept is crucial for understanding the long-term growth potential of investments and for comparing different investment opportunities.
How to Calculate Cumulative Gain?
The following steps outline how to calculate the Cumulative Gain:
- First, determine the initial investment (P).
- Next, determine the gain rate per period (r) and convert it to a decimal by dividing by 100.
- Next, determine the time period (t) in years.
- Next, gather the formula from above = CG = P * ((1 + r)^t – 1).
- Finally, calculate the Cumulative Gain (CG).
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem:
Use the following variables as an example problem to test your knowledge.
Initial Investment (P) = $1,000
Gain Rate (r) = 5% per year
Time Period (t) = 10 years
