Compounded Rate

[Guest]

I need to have a formula which solves what the constant rate of increase per
year was to obtain a figure.

I know the % increase from base yr to end yr was 28.08%. I now need to know
what % (constant) was needed to increase each year to get to the end figure.

Make sense?

 

[Guest]

=((final_value / initial_value) ^ (1/number_of_years)) - 1
Ex ((12808/10000) ^ (1/3) - 1 = 8.6%

 

[David Biddulph]

=(1+28.08%)^(1/n)
where n is the number of years to give 28.08%

 

[David Biddulph]

-1, of course:
=(1+28.08%)^(1/n) -1

 

[joeu2004]

I know the % increase from base yr to end yr was 28.08%. I now need to know
what % (constant) was needed to increase each year to get to the end figure.

=rate(n, 0, -1, 1+28.08%)

where n is the number of years.

Becoming familiar with the basic financial functions can help you when
you need to solve more complex problems (e.g. you made an annual
contribution).

 

[joeu2004]

PS....

=rate(n, 0, -1, 1+28.08%)

I should have noted that Excel's RATE() implementation is unreliable
insofar as it sometimes fails unless you can provide a good "guess"
argument. So in this simple case, if you are comfortable with the
exponential formulation, it is certainly more efficient and arguably
more reliable. I offered the RATE() solution merely as an alternative
for your consideration. Some people prefer to use the financial
functions because of their similarity to functions on business
calculators.