Enter the present value, future value, and the number of years an asset of investment has been growing into the calculator below to determine the growth rate in % per year.
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Growth Rate Percent Formula
The following formula is used by the calculator above to determine the growth rate in percent of a value over time.
x(t) = x0 × (1 + r) ^t
Where r is the growth rate in percent. This equation can further be simplified to the following:
r = (x(t) / x0)^1/^t - 1
- Were X(t) is the final value
- X0 is the initial value
- t is time in years
To calculate growth rate, divide the final value by the initial value, raise the result to the power of 1 over the time period, then subtract 1.
In this article, we’re going to explain the growth rate and how to calculate it.
We will also answer some frequently asked questions related to growth rate.
Growth rate is the rate at which something grows. The term is commonly used for growth of businesses, economy, or population. Growth rate is often measured annually and it’s indicated in percentage.
To write a growth rate equation, you will need to obtain two things. The start value and the end value. The growth rate formula should look like this:
For example, let’s say that a business had a net worth (start value) 1,000,000 dollars, and its net worth became 1,300,000 in the following year (end value).
By substituting in the formula,
GR == 0.3 = 30%
In mathematics, growth rate is defined as the fractional change per unit time. Before we write the formula, we need to understand that the Start Value is referred to as X. The (End Value – Start Value) is referred to as Δx.
Before we can acquire the growth rate, we need to calculate the fractional change. We can do this by using the equation
Once we acquire the fractional change, it’s divided by the unit time which is referred to as Δt.
The final equation would be
Growth rates have five levels:
- Less than 15% (Initial Growth)
- 15-25% (Rapid Growth)
- 25-40% (Very Rapid Growth)
- 40-100% (Hyper Growth)
- More than 100% (Light-Speed growth)
With that being said, a 7% growth rate may initially seem underwhelming. But if it is maintained, the growth rate should be doubled within a few years.
In other words, a 7% growth rate is a good rate for a new business, and a bad one for a long-lasting business.
The abbreviation (GDP) is short for Gross Domestic Product.
GDP growth rate is defined as the annual average rate of the change in gross domestic product.
The abbreviation (GNP) is short for Gross National Product.
GNP is the total market value of all the goods and services provided by a certain nation’s economy over a period of time. This period is often a year.
GNP and GDP are almost the same. The exception is that GDP doesn’t include the legal income from the residents’ abroad investments.
GDP, or gross domestic product, is the monetary value of all goods and industries in an economy.
An increased GDP generally means a strong economy, while a decreased one means a weak economy.
However, GDP can sometimes give out false information. Since it incorporates economic losses suffered by accidents and natural disasters into the production economy.
How to calculate a growth rate?
The following problem is an example of calculating the growth rate of a value or set of numbers.
Step 1: First, determine the initial value of the growth.
In this example, the initial value is found to be 1500.
Step 3: Next, determine the final value of the growth.
In this case, the final value is found to be is 4000.
Step 4: Next, determine the amount of time it took for the value to grow.
In this problem, the total time elapsed is found to be 5 years.
Step 5: Calculate the growth rate using the formula above:
r = (x(t) – x0)^ 1/t – 1
r = (4000/1500)^ 1/5 – 1
r = 21.62% per year/period
A growth rate percent is the percentage increase of an exponential function. That is the rate increase of a value over each unit of time.
Absolutely, a negative growth rate equation will yield values that approach 0 but never reach it.